Foot Locker stock fell 31% as the company suspended dividends after turning into a loss

Foot Locker Inc stock fell. fell 31% in pre-market trading Wednesday, after the sporting goods retailer swung to a loss in the second quarter, cut its guidance for the full year, and said it would suspend its quarterly dividend to conserve cash.

The news comes a day after a disappointing report from Dick’s Sporting Goods Inc. DKS competition,
which that company blamed for the spike in shoplifting.

foot Locker Florida,
The company had a net loss of $5 million, or 5 cents per share, during the quarter, after income of $94 million, or 99 cents per share, in the year-ago period. Adjusted earnings per share came in at 4 cents, which is in line with the FactSet consensus.

Sales fell 9.9% to $1.891 billion from $2.065 billion, trailing the FactSet consensus of $1.879 billion. Same-store sales fell 9.4%, matching the FactSet consensus.

“The second quarter was very much in line with our expectations, despite still challenging consumer conditions,” Chief Executive Mary Dillon said in a statement.

“However, we saw a softening of trends in July and we are adjusting our outlook for 2023 to allow us to better compete for price-sensitive consumers, while continuing to lean towards the strategic investments that drive our plan,” she said. The strategic plan shown at Investor Day in March.

The company lowered its guidance for the full year and now expects adjusted earnings per share to range from $1.30 to $1.50, down from previous guidance of $2.00 to $2.25. It expects sales to range from a decline of 8.0% to 9.0%, versus the previous guidance of a decline of 6.5% to 8.0%.

The company said it will pause its quarterly cash dividend beyond its recently approved October dividend to conserve cash for strategic investments.

“We intend to update the market on our future capital allocation plans and the timing around our long-term financial goals when we report our fourth-quarter results,” Dillon said.

Gross margin decreased by 460 basis points in the second quarter, driven by higher promotional activity, which included higher write-offs, as well as lower occupancy and higher deflation.

Deflation, a factor that appears in many retailers’ quarterly earnings, can include damaged merchandise, but increasingly points to shoplifting, which companies say is often carried out by organized gangs. This problem costs companies in the retail sector billions of dollars annually, according to executives.

be seen: The CEO says Wal-Mart’s “downsizing” challenges differ from those faced by other retail giants

Related: The CEO says Target faces an “unacceptable amount” of retail theft and organized retail crime

Dick’s on Tuesday squarely blamed its weak earnings on the issue.

“Organized retail crime, and theft in general, is an increasingly serious problem affecting many retailers,” CEO Lauren Hobart told analysts at the company’s earnings conference call.

Chief Financial Officer Navdeep Gupta said on the call that organized retail crime was “much higher than we expected.”

For more, see: Dick’s Sporting Goods CEO highlights impact of organized retail crime: ‘What’s happening is very worrying’

Foot Locker stock is down 39% year-to-date, while the S&P 500 SPX is down.
It has gained 14%.

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