Foot Locker stock down 35%: what’s disappointing shareholders?

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Foot Locker Inc (NYSE: FL) reported market-beating results for the fiscal fourth quarter and raised its dividend on Friday. Shares still tanked close to 35% on downbeat future guidance.

What the Q4 report tells us

Net income of $103 million declined from $123 million in the same quarter last year.
On a per-share basis, Foot Locker earned $1.02 versus the year-ago figure of $1.17.
Adjusted EPS printed at $1.67, beating FactSet consensus for $1.44.
A 7.0% annualised growth in sales was also better-than-expected.
Foot Locker lifted its quarterly dividend to 40 cents a share – a 33% YoY increase.
The board authorised a new stock buyback programme worth $1.20 billion.
Cost-cutting programme to save roughly $200 million.

The results come a week after Foot Locker said Reebok will bring exclusive footwear to its stores as part of its expanded partnership with the fitness apparel company.

Guidance for fiscal 2022

For fiscal 2022, Foot Locker forecasts its per-share earnings (adjusted) to fall in the range of $4.25 and $4.60. It expects a 4.0% to 6.0% hit to sales this year. In comparison, analysts had called for $6.41 of full-year adjusted EPS on a marginal 0.1% decline in sales.

The sportswear company cited a lack of fiscal stimulus, changes to vendor mix and restructuring for its dovish outlook. In fiscal 2021, a single vendor could make up 65% of total supplier spend. By the fourth quarter of this year, that percentage will stand at no more than 55%. In the earnings press release, CEO Richard Johnson said:

Our journey to diversity our mix of business and expand our reach as a house of brands and banners is ongoing. This change reflects the accelerated strategic shift to DTC by one of the company’s vendors and Foot Locker Inc’s ongoing brand and category diversification efforts.

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