Numerous factors contributed to poor quarterly results for Foot Locker, which were “broadly in line” with the retailer’s expectations. While Foot Locker remains committed to its “Lace Up” strategic plan that was introduced in March, softening sales trends in July forced it to drop its financial outlook for the current fiscal year.

The retailer, saddled with $1.8 billion in inventory at Q2 end, up 11 percent year-over-year, intends to take more aggressive markdowns for the remainder of 2023. It is now forecasting an 8.0 to 9.0 percent decline in annual sales, a 9.0 to 10.0 percent drop in comparable sales and additional gross margin contraction due to the planned promotional sell-off.

In Q2, Foot Locker reported an operating profit of $1 million against a profit of $142 million for the period ended July 29 as total revenues declined by 9.9 percent to $1,861 million. Ongoing consumer softness, a changing vendor mix, and a repositioning of its Champs Sports business contributed to a 9.4 percent drop in comparable-store sales. North American sales fell by 13.1 percent to $1,288 fall-off at 25.3 percent, followed by WSS (-7.9%), Kids Foot Locker (-4.7%), and Foot Locker (-4.6%). Higher markdowns and shrinkage coupled with occupancy costs contributed to a 460-basis point decline in quarterly gross margin.