Foot Locker plummets after suspending dividend following soft Q2 earnings

Updated at 8:06 am EDT

Foot Locker  (FL) - Get Free Report shares plunged lower Wednesday after the sporting goods retailer posted weaker-than-expected second quarter sales, while pausing its dividend payment and slashing its full-year profit forecast, citing softening consumer trends and a still-tough consumer backdrop".

Foot Locker said adjusted earnings for the three months ending on July 29 came in at 4 cents per share, down from $1.10 per share earned over the same period last year and matching Street forecasts. Group revenues, Footlocker said, slumped 10.1% to $1.861 billion, just shy of analysts' estimates of an $1.878 billion tally.

The company also said it would suspend payment of its quarterly dividend in order to "increase balance sheet flexibility in support of longer-term strategic priorities" following the previously-approved payout slated for October 27.

Foot Locker, which relies on Nike  (NKE) - Get Free Report for around 60% of its annual sales, now sees fiscal 2023 profits of between $1.30 to $1.50 per share, down from its prior forecast of between $2.00 and $2.25 per share, with full-year sales falling between 8% and 9% compared to its spring forecast of declines between 6.5% and 8%. 

"Our second quarter was broadly in line with our expectations, despite the still-tough consumer backdrop," said CEO Mary Dillon. "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 31.5% lower in pre-market trading immediately following the earnings release to indicate an opening bell price of $15.90 each.

Nike shares were marked 3.6% lower at $97.80 each while Under Armour  (UAA) - Get Free Report fell 1.5% to $7.09 each.

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