Foot Locker Stock Plummets After Slashing Profit Forecast; Nike, Under Armour Slump

Foot Locker  (FL) - Get Free Report shares plunged lower Friday after the sports goods retailer slashed its full-year profit forecast following weaker-than-expected first quarter earnings and "meaningfully softer" overall sales.

Foot Locker said adjusted earnings for the three months ending in October came in at 70 cents per share, down 56.2% from the same period last year and  firmly below of the Street consensus forecast of 81 cents per share. Group revenues, Footlocker said, slumped 11.4% to $1.93 billion, just shy of analysts' estimates of a $1.99 billion tally, as same-store sales fell by a bigger-than-expected 9.1%.

The group, which relies on Nike  (NKE) - Get Free Report for around 60% of its annual sales, now sees fiscal 2023 profits of between $2.00 and $2.25 per share, down from its prior forecast of between $3.35 and $3.68 per share, with full-year sales falling between 6.5% and 8% from 2022 levels. 

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"Coming off the recent launch of our Lace Up Strategy at our Investor Day in March, we are making early progress in building a strong foundation to return to sustainable growth beyond this year," said CEO Mary Dillon. "However, our sales have since softened meaningfully given the tough macroeconomic backdrop, causing us to reduce our guidance for the year as we take more aggressive markdowns to both drive demand and manage inventory."

"Despite the challenging near-term trends, we remain committed to our long-term strategy, including making the necessary investments to drive our Lace Up plan, and maintain conviction in our ability to execute against our new strategic imperatives," she added.

Foot Locker shares were marked 24.8% lower in pre-market trading to indicate and opening bell price of $31.21 each, a move that would lop nearly $1 billion from the group's market value. 

Nike shares were marked 2.365% lower at $115.72 each while Under Armour  (UAA) - Get Free Report was down 3% to $7.39 each.

Earlier this year, Nike cautioned that that shifting excess inventory would pressure near-term profit margins, clouding its third quarter earnings beat and forecast slowing near-term sales amid a pullback in consumer spending in key markets.

Nike said it sees a 250 basis point decline in full-year profit margins as it grapples with higher freight costs, a stronger dollar and "accelerated actions to reduce inventory by year-end".

"With strong traffic and retail sales growth, and reduced inventory buys for the spring and summer seasons, we are increasingly confident that we will exit the year with healthy inventories across the marketplace," CRO Matt Friend told investors on a conference call on March 22.