Foot Locker shares took a nosedive after the company reported a decline in same-store sales and year-over-year sales for the second quarter.
On Friday, the athletic retailer’s shares plunged 27.92 percent to close at $34.38, posting its biggest daily loss so far since November 2008 when stocks dropped 28.1 percent.
Foot Locker’s net income was $51 million, or 39 cents per share, compared to $127 million, or 94 cents per share in the same period last year. The decline is due in part to the $50 million pre-tax litigation charge involving a lawsuit against the company regarding the conversion of its pension plan in 1996 for former employees.
Adjusted earnings per share for second quarter was 62 cents on revenue of $1.701 billion, against analysts’ estimate earnings of 90 cents on revenue of $1.8 billion, according to a Thomson Reuters survey.
Comparable-store sales, which is an important Wall Street metric, fell 6 percent. Total sales were down 4.4 percent at $1,701 million, compared to $1,780 million in last year’s second quarter.
The decline is partly attributed to the low sales for some of the retailer’s top styles. “While we believe our position in the market for premium sneakers remains very strong and our customers continue to look to us for compelling new athletic footwear and apparel styles, sales of some recent top styles fell well short of our expectations and impacted this quarter’s results,” Richard Johnson, chairman and chief executive officer of Foot Locker, said in an earnings statement.
“At the same time, we were affected by the limited availability of innovative new products in the market. We believe these industry dynamics will persist through 2017, and we expect comparable sales to be down three to four percent over the remainder of the year.”
Foot Locker also points to the rise in online shopping as one of the reasons behind the company’s poor results.
“The disruption taking place today in our industry and in retail in general is the most significant I’ve ever seen. The fact is that we’re seeing mobile technology drive shifts in consumer behavior and spending patterns at a faster pace than our industry has been able to keep up with,” Johnson said in a conference call with analysts. “With constant access to new influences, trends, information, and ideas, consumers’ attention spans are getting shorter, and we’re seeing that they’re moving from one style to the next faster than ever before.”
During the quarter, the company ran aggressive promotional activities to clear inventory and to compete against discounts by other retailers. For this reason, Foot Locker’s gross margin rate decreased to 29.6 percent of sales from 33 percent last year and non-GAAP net income slipped to $81 million or 62 cents a share.
During an earnings call on Friday, Johnson said that the company is not worried about Amazon.com Inc. and does not see vendors selling Foot Locker products on the ecommerce platform as a threat.
Nike and Under Armour also reported lower-than-expected results. Nike’s shares slumped 4.37 percent to close at $54.95, Under Armour stocks fell 3.87 percent and ended at $17.12 on Friday.
Nike recently confirmed that it would be selling some of its products on Amazon. It also announced that it will be reorganizing its structure and reduce manpower with the objective of increasing direct-to-customer efforts.
During the quarter, Foot Locker opened 24 new stores, challenging the growing trend of store closures concerning the industry today. The company, however, closed a total of 19 stores in the second quarter.
The company’s shares remain low at 51.5 percent year-to-date, while the S&P 500 index is up 8.3 percent for the same period.