Foot Locker (FL) -) shares plunged to a near 13-year low Wednesday after the company posted weaker-than-expected second-quarter sales, slashed its full-year profit forecast, and paused its dividend payment, citing softening consumer trends and a "still-tough consumer backdrop."
Adjusted earnings for the three months ended July 29 came in at 4 cents a share, matching Wall Street forecasts and down from $1.10 a share in the year-earlier period. Group revenue slumped 10.1% to $1.86 billion, shy of analysts' estimates of an $1.88 billion tally.
Following the previously approved payout slated for Oct. 27, the company said, it will suspend payment of the quarterly dividend to "increase balance-sheet flexibility in support of longer-term strategic priorities."
Foot Locker, which relies on Nike (NKE) -) for around 60% of its annual sales, now sees fiscal 2023 profit of $1.30 to $1.50 a share, down from its prior forecast of between $2 and $2.25 a share. Full-year sales should come in 8% to 9% lower compared with its spring forecast of a decline between 6.5% and 8%.
Foot Locker eyes 'price-sensitive consumers'
"Our second quarter was broadly in line with our expectations, despite the still-tough consumer backdrop," Chief Executive Mary Dillon said. "However, we did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumers, while still leaning into the strategic investments that drive our Lace Up plan.
"To ensure that we have the flexibility to continue to fund our strategic investments appropriately, we are pausing our quarterly cash dividend beyond our board's recently approved October payout," she added.
"We intend to update the market on our go-forward capital-allocation plans and the timing around our longer-term financial targets when we report fourth-quarter results."
Foot Locker shares were marked 33.75% lower in the opening hour of trading and changing hands at $15.43, near the lowest since 2010 and extending the stock's year-to-date decline to around 58.5%.
Nike shares were marked 3.6% lower at $97.80 each, extending a 10 day run of declines, the longest on record, while Under Armour (UAA) -) Class A share fell 1.2% to $7.12 each.
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