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Why Foot Locker Stock Plunged Today

Steve Symington, The Motley Fool

What happened

Shares of Foot Locker (NYSE: FL) are down 18.8% as of 3:40 p.m. EDT Friday after the footwear retailer announced weaker-than-expected second-quarter 2019 results. 

More specifically, Foot Locker's quarterly sales declined 0.4% year over year to $1.774 billion, translating to adjusted (non-GAAP) net income of $72 million, or $0.66 per share (down from $0.75 per share a year earlier). But analysts, on average, were anticipating earnings of $0.67 per share on much higher revenue of $1.82 billion. 

Foot locker storefront

IMAGE SOURCE: FOOT LOCKER.

So what

To be fair, Foot Locker's revenue would have climbed 0.8% had it not been for the negative impact of foreign currency exchange, thanks to a combination of new locations and a 0.8% increase in comparable-store sales.

"While our results in the second quarter did come in at the low end of our expectations, we saw improvement in our performance as we moved through each month of the quarter," elaborated Foot Locker CEO Richard Johnson. "We remain deeply connected with sneaker and youth culture, and believe this positive momentum exiting the quarter has us well positioned for the back-to-school period and beyond."

Johnson added that the company is making "meaningful progress" toward its longer-term strategic priorities.

Now what

During the subsequent conference call, CFO Lauren Peters said Foot Locker remains on track to achieve its previous guidance -- which doesn't account for the impact of potential tariffs -- for comparable-sales growth in the mid-single-digit percent range, with a high-single-digit increase in full-year earnings per share. She also said, however, that gross margin is now expected to be up 10 to 30 basis points this year, or slightly below its previous target range.

Given Foot Locker's relative underperformance today, and with the broader market falling hard on escalated trade tensions, it was no surprise to see Foot Locker stock endure an outsized plunge in response.

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Steve Symington 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.

This article was originally published on Fool.com