Foot Locker (FL) earnings Q3 2024

Foot Locker slashed its full-year guidance Wednesday after reporting a rough set of quarterly results that could be a warning sign for its largest brand partner Nike.

The sneaker giant fell short of Wall Street’s expectations on the top and bottom lines and blamed the miss on soft consumer demand and elevated promotions across the marketplace. The company also saw “softness” at Nike, CEO Mary Dillon told CNBC in an interview. 

“There are definitely some brands that we’re seeing comp gains, and then, you know, we’re also contending with some more recent softness out of Nike,” said Dillon. “Given their size and scale, it kind of makes sense that it would have an impact.” 

Foot Locker shares closed about 8% lower.

Here’s how Foot Locker did in its fiscal third quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 33 cents adjusted vs. 41 cents expected
• Revenue: $1.96 billion vs. $2.01 billion expected

In the three months ended Nov. 2, Foot Locker swung to a loss of $33 million, or 34 cents per share, compared with earnings of $28 million, or 30 cents per share, a year earlier. Excluding one-time items related to impairment charges for its atmos brand and other expenses, Foot Locker reported earnings of $31 million, or 33 cents per share. 

Sales dropped to $1.96 billion, down about 1.4% from $1.99 billion a year earlier. 

Dillon explained that consumers are showing up for key shopping moments, such as back-to-school and the recent stretch between Thanksgiving and Cyber Monday, but pulling back in between those events, making the peaks and valleys sharper than expected. Foot Locker is also dealing with slow demand for Nike, which is trying to turn around its business after relying too heavily on the same styles to drive sales. 

Nike veteran Elliott Hill took the helm of the company less than a month ago, and Wall Street has not yet heard his strategy. Given Foot Locker’s performance during its third quarter, Nike could post another set of less-than-stellar quarterly results when it reports on Dec. 19.

Nike is Foot Locker’s largest brand partner, accounting for about 60% of sales. If Nike is struggling, Foot Locker will inevitably suffer, too. 

“It’s not like across the board with all brands. Frankly … I would just say that there’s some that are more promotional, but in total, the category is pretty promotional,” said Dillon. “There’s an elevated promotional level in this category that we hadn’t forecasted to be as it is.” 

She reiterated that Foot Locker’s relationship with Nike and its new CEO is “very strong” and expects the slow demand to be a blip as Hill gets his footing. 

“We have a great relationship with him [and] feel very confident about where he and his team are going,” said Dillon. “I think we’re going to work through all that, that’s the thing.”

Given the tough situation with Nike and…