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Why Foot Locker Dropped 13% Friday

By Daniel Miller – May 22, 2020 at 4:39PM

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Disappointing first-quarter results are hitting the stock price, but Foot Locker's long-term story remains intact.

What happened

Shares of Foot Locker (FL 0.51%), a leader in footwear and accessories, declined as much as 13% Friday, after the company released disappointing first-quarter results.

So what

COVID-19's impact on Foot Locker was substantial during the first quarter. Foot Locker's first-quarter sales declined 43.4% to $1.18 billion from the prior year's $2.08 billion. The company also reported a net loss of $98 million, or $0.93 loss per share, compared with the prior year's net income of $172 million, and its gross margin declined from 33.2% to 23%.

A person holds the laces of a shoe that sits between several other athletic shoes.

Image source: Getty Images.

"Against the backdrop of the pandemic and our global store closures, our team has focused intently on controlling what we can in order to protect our business," said Richard Johnson, chairman and CEO, in a press release. "We have taken full advantage of the investments we have made in technology in recent years in order to stay connected with our customers and serve them online, worked aggressively to protect our financial position and flexibility, and taken actions to ensure we are well positioned to drive our business forward." 

Now what

For many retailers it's a waiting game: waiting to see how quickly consumers and the economy bounce back. Foot Locker will reopen stores in a phased approach and already has 1,400 open locations. Management also suspended its dividend to save cash, increased its liquidity by drawing from its credit facility, and reduced its full-year capital expenditures. The near-term outlook remains grim for the company, but once COVID-19 is under control, Foot Locker's long-term story remains intact.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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