Foot Locker on Friday reported total second quarter sales rose 4.8% (or 3.9% currency neutral) to $1.8 billion, with strong performance in North America. Net income in the quarter rose to $88 million from $51 million a year ago, according to a company press release.
Second quarter comparable store sales rose 0.5%. By channel, store comps fell 0.8%, while direct-to-consumer comps rose 9.3%, executives told analysts on Friday, according to a transcript from Seeking Alpha. Store traffic was down low single digits for the quarter, with traffic in the U.S. essentially flat and internationally down high single digits, they said. Direct-to-consumer sales in the quarter were 13.5% of total sales, up from 12.7% last year.
During Q2, the company opened 13 new stores, remodeled or relocated 33 stores and closed 21. As of Aug. 4, the company operated 3,276 stores worldwide.
Foot Locker met or exceeded expectations in the second quarter, and that's good news for Nike too. The company is back in the black when it comes to store comps, and that's set to improve in the second half of the year, Wedbush analysts said in comments emailed to Retail Dive.
"The company has therefore succeeded in overcoming fears among some investors of continued negative comps that would have put the outlook at risk," Wedbush analyst Christopher Svezia said. "In the end, [Foot Locker] appears to have fulfilled a key part of its story, and Nike's strongest key partner seems to be receiving the relevant depth of premium product (Nike and other brands) to drive its business positive."
The company also has a hold of its inventory, which was down 2.8% from a year ago, compared to a sales increase of 4.8%, Chief Financial Officer Lauren Peters told analysts. The improvements reflect concerted effort by the company, according to CEO Dick Johnson, who promised to not only keep up with the swiftly changing retail business but also "to come out ahead of it."
"We have improved the breadth and depth of many of the top trending footwear styles across categories. We have also upgraded our apparel offerings and we are continuing to see very encouraging results," he told analysts. "We are introducing Power Stores in key markets to create more immersive and community-oriented customer experiences. At the same time, we are entering new markets that we believe have strong growth potential, while expanding our global footprint," he later added.
That strategy has Foot Locker shuttering 100 stores this year, while opening about 40, in a process that Johnson said last week would be highly selective. While Foot Locker is grappling with significant market turmoil in its sector, it's on the right track, according to NPD Group Vice President, Senior Industry Advisor Matt Powell, who in recent months has warned that sports retailers and manufacturers have flooded the sneaker market in particular without much regard for consumers' emerging preference for leisure styles.
The company's gross margin rate rose to 30.2% from 29.6% a year ago, and that came largely from stronger product assortments, Peters said. For the third quarter, the company still expects comparable sales to be up low single digits, with the fourth quarter strengthening further.