Foot Locker’s stock plunged by nearly a third after the sneaker retailer reported dismal earnings in the second quarter that it blamed on “ongoing consumer softness.”
In the latest quarter, Foot Locker’s sales fell 9.9% to $1.8 billion — a sharp drop from the $2.1 billion a year earlier, the company said in its earnings report Wednesday
Foot Locker’s share price tumbled 28% to close at $16.64.
The New York-based retailer, which has nearly 900 outposts across the US, slashed its yearly forecast due to “the still-tough consumer backdrop,” and now expects sales to decline 8% to 9% for the year. It originally predicted sales would be down 6.5% to 8%.
“We did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumer,” Foot Locker chief Mary Dillon said in a statement.
The footwear chain slashed its yearly earnings outlook to between $2 and $2.25 per share — down from the $3.35 to $3.65 a share it originally predicted and well below the $3.47 analysts were expecting.
A day earlier, Macy’s shares dropped after it posted declining sales in its second-quarter earnings, which it attributed to declining consumer spending and increased credit card delinquencies
Macy’s net sales fell to $5.1 billion in the 13-week period ended July 29 — down from the $5.6 billion reported in the same period last year.
In-store sales at Macy’s 500-plus locations also dropped 8% and digital sales declined 10% compared with the year-ago period, sending Macy’s share price tumbling over 14%, to $12.57 on Tuesday.
Macy’s said there were particular challenges in the active, casual and sleepwear categories, while beauty products and fragrances performed better.
In addition, other revenues — such as earnings from credit interest and other non-operating revenues — decreased $84 million from the prior year period, to $150 million.
The New York City-based department store chain attributed the losses to “credit card revenues which were negatively impacted by an increased rate of delinquencies.”
Customers paying their credit card bills on time is viewed as a proxy for consumer health, and an increased number of defaulted payments is an indicator that consumers will have to prioritize bills over shopping.
“In light of ongoing macroeconomic pressures and uncertainty on when those will abate, the company continues to take a cautious approach on the consumer,” Macy’s earnings report said.
The department store’s chairman and chief executive, Jeff Gennette, reaffirmed the retailer’s cautious outlook on consumer spending in an earnings call with investors on Tuesday, “especially at Macy’s where roughly 50% of the identified customers have an average household income of $75,000 or under,” he said.
“We have seen the Macy’s customer more aggressively pull back on spend in our discretionary categories. They are not converting as easily and becoming more intentional on the allocation of their disposable income with an ongoing shift to services and experiences,” he added.
Macy’s has been underperforming in the stock market this year. Its stock has fallen more than 37% year to date.
In yet another example of softening consumer spend, Target said its quarterly sales fell for the first time in six years.
Sales at stores and digital channels open for at least a year were off 5.4% from a year earlier, according to Targets earnings report released last week, while digital sales slipped 10.5%.
Though Target’s longtime CEO Brian Cornell attributed part of the losses to “the impact of inflation,” CFO Michael Fiddelke added that boycotts of the retailer’s controversial “Pride” collection also contributed to the quarter’s results.
Dick’s Sporting Goods also missed analyst forecasts for the second quarter, reporting a 23% drop in profits across its more than 700 stores nationwide — despite sales rising 3.6%.
Dicks attributed the losses to organized retail crime and our ability to effectively manage inventory shrink, an industry term used to describe stolen or lost merchandise.
