US' Foot Locker delivers solid Q2 FY22; reports net income of $94 mn

Second quarter comparable-store sales decreased by 10.3 per cent versus record sales levels from last year. Total sales decreased by 9.2 per cent, to $2,065 million, compared with sales of $2,275 million in the second quarter of 2021. Excluding the effect of foreign exchange rate fluctuations, total sales for the second quarter decreased by 6.1 per cent, the company said in a media release.

Gross margin declined by 340 basis points compared with the prior-year period, driven mainly by higher markdowns, as the promotional environment started to normalise after last year's unusually favourable backdrop, followed by supply chain costs, and occupancy deleverage. SG&A deleveraged by 210 basis points, driven mainly by labour inflation and the decline in sales.

"Despite an increasingly challenging macroeconomic backdrop, we delivered a solid quarter against the favourable fiscal stimulus and promotional environment from last year," said Richard Johnson, chairman and chief executive officer. "Driven by strong execution from our team and ongoing progress against our key objectives, we grew our sales 16.4 per cent above levels from 2019."

Johnson continued, "Our strategy of diversifying our brand portfolio and offering more choice continues to resonate with consumers and is enabling us to expand our customer base. We are confident that our operational excellence, our improving ability to fuel our customer's desire for self-expression, and the secular trends driving our categories, put us in a strong position to navigate the expected ongoing macroeconomic headwinds in the back half of 2022."

For the first six months of the year, the company posted net income of $227 million, or $2.36 per share on a GAAP basis, compared with $632 million, or $6.02 per share, for the corresponding period of 2021. On a non-GAAP basis, earnings per share for the six-month period totalled $2.71, compared to $4.05 per share in the prior year period in 2021. Year-to-date sales were $4,240 million, a decrease of 4.2 per cent compared to the sales of $4,428 million in the corresponding six months of 2021. Year-to-date, comparable store sales decreased 6.2 per cent, while total year-to-date sales, excluding the effect of foreign currency fluctuations, decreased by 1.7 per cent.

As of July 30, 2022, merchandise inventories were $1,644 million, up 52 per cent compared to the supply-constrained levels at the end of the second quarter last year. Current inventory quality and aging are healthy, positioning the company well for the Back-to-School season and the third quarter overall. At quarter-end, the company's cash and cash equivalents totalled $386 million, while debt was $455 million.

During the second quarter of 2022, the company repurchased 1.4 million shares of its stock for $40 million and paid a quarterly dividend of $0.40 per share, for a total of $38 million, the release added.

Andrew Page, executive vice president and chief financial officer, said, "Following our solid results for the second quarter, against record results last year, we remain confident in our ability to achieve earnings within our original guidance range. But recognising that the back half will likely see more pressure than we originally anticipated, we now expect to be at the lower end. Our balance sheet, real estate flexibility, and relationships with vendors all remain strategic assets that will aid us in navigating ongoing macroeconomic volatility while we continue to serve the sport and sneaker communities."

Fibre2Fashion News Desk (KD)