Foot Locker (FL) 23 Aug 232024 Q2 Earnings call transcript

Good morning, and welcome to Foot Locker's Second Quarter 2023 Financial Results Conference Call. [Operator Instructions]. This conference call may contain forward-looking statements that reflect management's current views of future events and financial performance. Management undertakes no obligation to update these forward-looking statements, which are based on many assumptions and factors, including the effects of global economic and market conditions, currency fluctuations, customer preferences and other risks and uncertainties described more fully in the company's press releases and reports filed with the SEC, including the most recently filed Form 10-K or Form 10-Q. Any changes in such assumptions or factors could produce significantly different results, and actual results may differ materially from those contained in the forward-looking statements. Please also note that this conference call is being recorded. the to turn Higginbotham. now will call Robert over I Mr. Higginbotham, begin. you may

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from Drbul with first Bob [Operator Guggenheim. comes question Instructions]. Today's

Nike the question guess is the comps the business? penetration, exclusives sort helpful I Can just like on update I guess positive when just would standpoint? that could what the I the of relationship. exclusive have update other an you're you from give within seeing around think of then And is business just return be us Nike any level you to around

there. This call. Bob, let And be thank there's of please is clear. me clarify, will Mary. reiterating, apologize need Thank to actually, by anything you, you if we just the for of Bob. us the the Hopefully, start let know. you for And audio starting the quality Q&A

Frank versus in prepared the Sabrina did really heard remarks, obviously, a X launching as York, Let New focus one and build Nike partner, to fact, to of and specific in basketball York to me culture saying, important by marketplace, sneaker neat are you a just with of mentioned relationship the celebrating the is very start we both and And pleased the in we're recently basketball, event retailers kids women. And just York. for New a we us together the really on in strong be continue grassroots shoe them. We areas New unique of culture. the that here

for that marketplace will the lots would back starting knew So reset of year. working into though, through next we'd of move of and in as be there's we that a great. And future that's as strength a we see forward the growth is all couple This we quarters course, be we yet and reset year this year to so expect coming. the

feel do on good want talk those to together really it. and closely working you exclusives? we're So about And topics about

make say Sure. to the good Absolutely. progress. just Yes. would team continues really I

great success examples, Adidas. And X at Marseille as will as anniversaries Puma partners celebrated then at of ] release and sell-throughs NBA our holiday, we'll also Europe, of launching across Nike, into LaMelo that as here a lot topic we've part the new This in with recently really be of stores season. which buzz. in the which launching had incredible be our the had well better France on junior for the a generated its So [ third great we the iteration, Continental with Edwards just tremendous

progress Cozi continues vertical progress. team remarks, and the CSG Active. that, to you brands So then of very heard then And next make my in launch the in to on good our Locker, prepared

good very progress to continues make team on exclusivity. the So

a follow-up. Great. And just

if the On the your of the GOAT you could you and the have? us around cut decision flexibility, give just stake sort that to dividend financial ownership updated thoughts wondering

if know, XX% about that. of you with But back plan we our XX%, that's we'll we then Maybe to part dividend a start can come the okay, dividend, as payout Lace to and -- the as Up is ratio. pay

to And continue add a about plan. ratio. our give pause we're and you at Up with like flexibility invest payout substantial to the guidance, us GOAT, along Would So Board our -- made with in thing pause on decision a that? to the Lace new EPS Frank, to more long-term

Yes, sure.

a what within large So to share I can GOAT Group. continue is we be shareholder

and we looking We future to continue each results X into brands. partner the sharing, integration guys the insights to marketplace. continue opportunities update quarter future data we'll for as and on opportunities see you for certainly, And

next our Evercore today question from Warren ISI. And with Cheng comes

Are and March pulling also, reposition. that from ask the quantify been the from impact I actions the given there any And banner? Champs, pretty about in impact for you taken significant launches reposition? a outlined to for especially Champs speaker a away to is around you've Nike wanted us making what's your tweaks to the some strategy of way

Yes, Thanks start. the for I'll on Champs. question

then growth $XX what So very call expression. And the in as we the you sneaker new and portfolio clearly is recall, in quality we what then talked athlete, America seeker is our about the market And map opportunity Champs call strategy. and billion fashion active positioned we also adjacencies North a very forward our here there's good over which alone.

also and are fact, quarter some see we're getting resetting X which just very core on place performance; progress with what which essentials. And to is led in very to stores we pivoted apparel; brand, improved are in consumer good about that it's the that's very support, different sneaker differentiated here has pillars: it are of planned XX the And where making we important very 'XX. one from Champs and performance, out. and our And repositioned the is then past also got Locker. and turning is we a and happy so style, done another for We've call here. team than sport vendor we good that's has been The we meaningfully think which starting the got as how Foot

about the we've we to the end of comps decisions reset expectations for start taken, XXXX. and talk that improved see we'll lap later then we some we'll our performance the difficult at So of year. And date expect the of through obviously, terms a the some in Nike of

fully customers banner just And previously that it existing your banner? be more that Inc. once is Champs about segmenting serving served will the customer who there is by Is base? weren't repositioned? to a on Locker new Or Foot idea follow-up win the

Yes.

combination of think a both. it's I

the have those customer I Foot XX% think of acquisition. at Foot the brands market. rest ex see been new performance about underrepresented in only the for Under Think When Nike we an we I an ASICs, X% Armour, our have think opportunity some are Locker we brands, that our Locker of that, talk about banner. Brooks, share share of arguably in

of is apparel. really sports led again, the through a Champs and so that opportunity style assortment performance a great with And on focus to real keen extend vendor lens

think incremental. it truly is I So

to also of some new be way. it'll consumers, but consumers along migration the the So acquisition

question Sachs. comes Kate our with Goldman McShane from today And next

marketplace today? competitive you This the half of about you is into And back-to-school holiday? as in into through think what the expecting year, are -- as Roach you footwear the look Brooke for are across the the the Kate. for markdowns for as of environment filling How you inventory and feeling you back channel and move magnitude

go of would your we seeing environment wallet. expect of that being higher for we somewhat promotional. through that, couple that an And things. in We're share household say well all price pressure as under our is being year. It's inventory continue that is in would for -- a that I is and somewhat inventory. terms of you the will what question. a elevated budget sensitive competing One Thank discerning, customer that we're

would promotional rest we that that, of the So year. expect will continue the through level

today Morgan And with Alex question comes Straton our from Stanley. next

something to you relationship said. wanted Great. that on clarify Nike I the

reset. said So second think this in you recall But you the if correctly, vendor I said Nike quarters the mix I that the of changed. was think hadn't I X last quarter,

sit that how clarify implications Maybe first profitability did versus year? impacts in just or are then what on this And you me? Nike for the quarter can just is a follow-up where and there? penetration second quarter last the that So

Yes. tell I'm you through reset number. sure We're exact not discussed. if the the that as I'll we are we is year What site evolving. going can certainly

XX%, that which mix is and ago. longer-term Our at ended we XX% be a we expect being our brands, business from other would this of quarter up year XX%

that's So plus points. X

progress that So we're goal. making against

Got it.

and just kind follow-up how one that comp the on of in Maybe Okay. trended the quarter.

like down May double the and quarter acceleration. was seems it think contemplated digits, I low second an guide

thought a uptick you just can the So that me And you also result of remind would why happen, what then of? kind didn't maybe what was June fruition? to come

Mike. is This Yes.

tied with expected from a as think the bit again, to momentum I saw we more May volatility ramp-up at double the July point, of June, and I operating saw that quarter. digit low your around little double-digit we think a a really of had the with in in a upside through the lot to a promotional of from in throughout guidance, low the perspective So our quarter original quarter, exited and And back-to-school month of expected for progression standpoint holiday. we

contemplated the high the half guidance into we our contemplated provided. digits really date. And things August, the continued we've a we that's what of acknowledging in of been that similar trending think as the of back single that the month August. I are to environment. promotional relatively down midpoint seen In that here we're for year, our have comps it's is And guidance

our outlook with again, is So year-to-date our trend.

are through And scenario that student As our risk, with horizon year, is the changes the potential back downside further our of of pressure. loans. half still macro the embeds we there really consumer on under the talk resumption recognizing that spending

from strategic upside are building wins of our standpoint some early the reflects guidance within Our and scenario seeing momentum initiatives. we a

Jonathan from with And our today comes Baird. question Komp next

comments high does up Are single you on the the to still Mike, could I wanted guidance last up there, work require down or improvement trending levels? I the And low If follow follow just from digits double -- any clear. digits? just July-August to

up, were Jonathan, about I to heard but correctly, asking you so breaking you make you sure trend. were August the

our So then of we quarter is exited -- of performance, is with the our in digits, August little a single high than the month high the bit is down within high year-to-date that better digits And line comp midpoint so half guidance. trending July. which back down again really where trend our single

then earnings hear looks the around think look That's helpful. okay. fourth traditionally, like me relatively quarter And doesn't factors of terms normal that just out quarter you the typically being fourth should if dollars. fourth unique of expect? about parse can a similar, maybe comments Okay. like profit is hopefully, much it and higher we the third quarter And earnings in little some to you there further Could pattern are we the when the

Yes.

of think split, as through we in as the relatively absent think of QX we've quantified again, $X.XX. I QX, the week, which XXrd EPS, we're split highlighting a even about terms

than is we're range the little again pressure what XQ, with year-over-year. think -- having that margin compares. But our QX then additional guidance with XQ tougher potential and acknowledging be a given some I the could

as But again, So towards markdowns bit they're QX. more of those a little weighted right relatively now, heavily by split even of [indiscernible].

Hutchinson today with And comes question Lorraine our from BofA. next

a the outsized to customer on Are really focus and is it drops? your limited Or this those point? is How launches gets that driving buying product at core still reacting customer demand? promotion

launch seeing our think innovation, that's consumer retro release I'd XQ that and launch favorably, is date the sell-throughs just very type very products. to in We're Whether the very good. quarter responding fiscal good Yes. was challenging still be or the on pure I you launch, or sell-through continue most year. remind

moderate So fourth QX. actually And launch it'll the quarter, QX, standpoint. be comp between in from a and comparison best it'll and relative QX be somewhere

factors that into So X our guidance. revised

put also the that it's and throughout U.S. into comps again Europe, across nonlaunch, both sell-through business, is retail store we been heightened sell-throughs, from that which very markets promotional conversions And key our promotions and on pressure seen also seeing pressure base. as and impacting well of are as base the competitors. sort On brand competitive. We've marketplace and went ETC

with from comes Janine question Stichter next our And BTIG.

Mike. Welcome I inventory. the ask to wanted about

I into where we we down be about your think potential than you're trending. should to by where still planning year-end? promotions on are based which think sales would be it Would slightly, clean the half what also And how cuts is completely expectation be are first year? And your to for linger now higher initial additional the based versus was about base just ask for Day I of on room expense the then assessment, to any wanted the at in there next given March? Investor

pleased the with quarter be the an progress up we from standpoint, inventory XX%. we're to So here made again, in that

out end the we down. calling that are will to year flat We slightly

We back of promotional that necessary into going believe have year. be guidance the our will we achieve needed within that levels the included half to the

acknowledging operating our perspective, cost expectations a we're from think 'XX. I below in

culture we -- really been in that cost expense an to obviously tight within have being $XX and you on SG&A team will with our imagine, continue overall savings initiatives. margin that I quarter tied then operate do commend we'll a again, is perspective, I the very very agile As management, and our spending. think can we've from we to of cost in for discretionary that could disciplined quantified across we manner. And front. million the

again, So Lace $XXX million the well. track on as we're Up to for tied the plan

when call, to book our adjustments I'll Yes. order first book. order going And of in business, slowdown begin made holiday in we and the to our QX base April the we some saw quarter our immediately just some add, back

as half both book flow our back of the we down and our as continue partners work expectations, continue our to miss receipt static. So back 'XX. that And to vendor order the did stay businesses for the not with sort internal adjustments, to of as make slow well to

with our And comes Joe Group. Telsey from question Advisory Feldman today next

lot share back-to-school of off we're seeing a retailers I you're the other a wanted from start to what But on trend to get a from out if little improved quick there? you -- a decent hearing sounds could is like back-to-school August-to-date there. thought why It more on color has and July.

what what some you're customer you I And and was seeing guys from on that. hearing so are with wondering just more thought your

booking more back-to-school. categories I would trends that is say in. a in would July hoped We of little a initially to to many we participate have year share different and [ kinds wallet our of of in of ] consumers bit manage terms at Yes. for would customers' weaker inventory back-to-school and say heavily than August, compete the products of that tale promoted levels. I

bit us. softer having supplies little for spend, So on we choiceful a and things that that of a are school little we our a skews on the a up sneakers And price want and their set back-to-school, little customer our well right? sensitive are pressure so like more are on that we of more we're know little in being as So bit equation sports pressure customers more part for products feel discretionary people a add like towards selection. would but equipment, terms it's

Adrienne today question Yih comes And our next with Barclays. from

I'm there basis then kind elevated XXX merchandise to it margin. of higher on on and quarterly was points to promos going the to was comments and the shrink that. offset some believe go I back

with about do aging a do shrink, product? Anything any XXX reserve that that points, of kind nature? how So you on a take And of seasonal just tactically, to then write-down you happen within basis Do or accrual of regard of to next that Or should going you once it a year a into quarters? How that? in do the July? do do in couple we January? year the think do you it once

question. the for thanks So

holiday again, majority margin and quarter into in operate and in regular product think vast then then our in clean on merch did the to of we're that's the into we and best a always QX level promotion. We But ultimately what of and doing standpoint, transition was through I have margin look that ensuring is incorporated the a a what from at pressure best within we from a XXXX. inventory basis, the -- results. QX aged elevated

results. our within incorporated it's So

then Great. shrink, if will? the And you

shrink The our of of within and And our driver within terms order year-to-date standpoint, embedded from then the an magnitude margin in guidance. promotions. a largest what's performance from it's been has

are has deleverage then within incorporated we've is expected to pressure the third half driver margin. And is a biggest back seen we've the into second our shrink shrink guidance what which embedded similar year-to-date. within costs, The our levels been had occupancy

the is the in guidance around increase activity. promotional So the really

my freight better? half? get And go you If And last then the in is the to that? back is you recapture. comment very that you get into are that better on one Can back seeing half, plan

could recapture, up. I I apologize, you heard you... broke

portion or that kind container like from any freight, on chain, supply the recapture of mark so and/or of benefit the last from Freight the shipping year? of

mean again, think promotional I I markdowns in needs guidance, build the we're incorporating where back of inventory to way the the that about it think the easiest is it change, to our is half to to biggest be. really

with And our Lejuez today comes last Citi. question Paul from

on promotional to partners? more what then key within that give close product? when more you so your Did than you'd detail curious talk about ability And happens allowances the where just you stores. expected? be you nonlaunch second, assortment of need And your Can from you to can get vendor

sales And curious or stores kind closed of the you XXX transfer I over thus nearby far. what see think you online.

Yes.

first question start back So to I'll the actually, the end. at --

wind majority the really XQ So the Sidestep our related to of down. in store closures

And was highly so into the concentrated marketplace. German that

benefited from Foot to over. we that. so inventory store have And moved which the most of the actually Foot very also about of Locker and conversions, would And better Locker were number rebranded intentional a we then some

the how sales XQ. the in we sort that's Sidestep to hit specifically mitigated of down So wind

through quarter to of category first where And the lifestyle second to of as think season. softest going continue into and the been of sort the the management softness, as the and fall in work to category. we're trend some we're sort spot that As seeing relates we quarter inventory that's a continued it into about the footwear that's certainly, of something out markdowns and the has running

And so I'd liquidating franchises. the of towards those say geared a large part allowance some markdown has of been

with to in allowance, brand on also our back and half. work book RTVs partners continue We reflowing our on order vendor the

all we there's possible North for inventory, year think that America and particularly cleanly to in partnership the of recognition good the been end and XXXX. as I as want sort reset So

Okay.

and like am business to to Lace only place stripers me team want reset been just want over want are also the that our we really transformation busy in us up. excited this the can. implement I our plan hard just committed our strategy expected, stores taking the is everybody by for about than in on and and this to us I So help importantly, close let plan. entire the season, working thank and aligned And traction I XX,XXX wrap to joining employees with our energized has the website tougher and while to our our with the to that strategies. I today. the Up through continue holiday ready get be back-to-school reemphasize DCs year And seeing thanking we're that's the

So forward progress we to on you, Thank you updating quarter. and next our goodbye. look

Thank We participating. you. you thank This today's for conference. concludes

You now may and have disconnect, a wonderful day.