Consumers have more money in their pockets thanks to government stimulus checks – and apparently many use it at malls and online to buy new sneakers, which is good news for Foot Locker.
© Noam Galai / Getty Images
The sneaker chain previewed its second-quarter results Monday ahead of the official release, saying sales were much better than expected, adding that it actually reports a profit.
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Shares of Foot Locker won more 7% on the news. And Nike shares were up 4%, helping the Dow surge nearly 300 points.
Foot Locker, which will publish its full results on August 21, indicated that sales in stores opened at least 18% year-on-year in the quarter, thanks to the reopening of many locations in June following closures in March due to the Covid-19 outbreak. Analysts had expected a drop of more than 20% for those so-called sales of the same store.
Sales were so strong because of “rising demand and the effect of fiscal stimulus,” Foot Locker chairman and CEO Richard Johnson said in a news release Monday.
“While these are undoubtedly challenging times, we are still pleased with the health of our category,” Johnson added, noting that sales were strong for both physical stores in malls and online.
The company also said it expected quarterly revenues of 66 cents and 70 cents to report a share. Wall Street predicted a significant loss.
CFO Lauren Peters said in the release that the company was able to generate a profit thanks to “disciplined cost management” and stronger sales – despite what they refer to as “a highly promotional environment.” That sentence typically means retailers are cutting prices to get customers in the door.
However, Foot Locker stock is down more than 25% this year. Leader of the sneaker industry Nike has posted a big drop in sales. Nike rivals Adidas and Under Armor are also struggling.
Foot Locker added in its statement Monday that the company has no plans to provide a prospect for the rest of 2020, after earlier withdrawing its guidance in March.
The company cited “the uncertainty surrounding the evolving Covid-19 pandemic and its potential impact on the back-to-school season, participation in team sports and additional government incentive packages.”
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