Foot Locker shares jump as first quarter results indicate a step in the right direction

Investors are rewarding Foot Locker (FL) for taking a step in the right direction.

On Thursday morning, shares jumped nearly 20% as CEO Mary Dillon called the first quarter a “great start to the year.” The company’s “Lace Up Plan,” which includes efforts to improve its digital operations, in-store experience, loyalty and brand development, appears to be showing early signs of promise.

Same-store sales fell 1.8%, better than the 1.93% drop Wall Street expected. Revenue came in at $1.88 billion, compared to the $1.89 billion expected, while adjusted earnings per share of $0.22 beat the $0.12 estimate.

The company reaffirmed its guidance for 2024, with same-store sales expected to grow between 1% and 3%, while overall sales are expected to be between a 1% decline and a 1% gain. It expects full-year EPS to be between $1.50 and $1.70.

This comes as consumers’ discretionary income is reduced by prolonged inflation, reduced savings and higher interest rates.

Prior to the report, Foot Locker shares had fallen nearly 27% year to date, compared to the S&P 500 (^GSPC) a gain of around 11%.

As part of this plan, Foot Locker unveiled a new store renovation (pictured below), which the company says results in higher foot traffic and basket sizes.

The company opened four new stores during the quarter and closed 37. It renovated or relocated 16 stores and brought 13 up to current design standards.

Foot Locker plans to refresh two-thirds of its Foot Locker and Kids Foot Locker locations worldwide over the next few years.

The company is also investing in digital sales, including its FLX Rewards loyalty program, which has been tested in Canada and is expected to officially launch in the second quarter. It’s showing early signs of “higher activations and average transaction metrics during testing,” according to Evercore ISI analyst Michael Binetti.

He hopes this will allow the company to gain more consumer insights. Only 20% of Foot Locker’s transactions occur through its loyalty program, compared to 60% to 80% for the retail industry.

Dillon said the launch will “further strengthen” its “demand flywheel” as it seeks to become a modern, omnichannel retailer.

It is also essential to reinvigorate relationships with brand partners. The company said it is “working closely on multi-year growth plans” with Nike, which represents 60% of its portfolio, as the shoe brand refocuses on wholesale.

Dillon said the team was “very encouraged by the innovation pipeline that has been shared from the Paris Olympics through the second half of 2024 and then 2025.”

The story continues

The distribution of winnings

Here’s what Foot Locker reported for the first quarter, compared to Wall Street estimates, according to Bloomberg consensus data:

Adjusted earnings per share: $0.22 versus $0.12

Income: $1.88 billion versus $1.89 billion

Same-store sales growth: -1.8% versus -1.93%

—

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email him at bdipalma@yahoofinance.com.

Click here for all the latest retail stock news and events to better inform your investment strategy