Why Foot Locker Stock Dove 22% in May

The sneaker and sportswear retailer announced disappointing first-quarter results as growth in its segment slowed.

Demitrios Kalogeropoulos
Demitrios Kalogeropoulos
Jun 9, 2017 at 6:25PM
Consumer Goods

What happened

Foot Locker (NYSE:FL) shares shed 22% last month, according to data provided by S&P Global Market Intelligence.

FL Chart

FL data by YCharts

With that dip, the stock has tumbled into firmly into negative territory for the year to date, down about 21% compared to a 9% rise for the broader market.

So what

Foot Locker's May decline came following a surprisingly weak first-quarter earnings report. Comparable-stores sales inched higher by less than 0.5%, a marked slowdown from the prior quarter's 5% growth rate.

A jogger checks her smartwatch.

Image source: Getty Images.

Management blamed a weak beginning to the quarter on delays in IRS tax refunds. "The slow start we experienced in February was unfortunately not fully offset by much stronger sales in March and April," CEO Richard Johnson said in a press release.


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Now what

The retailer is targeting improved comps figures for the rest of the year even as the sports apparel and footwear segment struggles under the weight of decreased shopper traffic. Investors will be keeping a close eye on whether Johnson and his team can deliver their predicted rebound despite those soft selling conditions.

Margins will be critical to watch as well, given that Foot Locker may have to trade some profitability for healthier sales volumes. Gross profit margin ticked down to 34% of sales from 35% a year ago, and if that trend continues, it would threaten the retailer's ability to hit its goal of boosting earnings by mid-single digits in 2017.