Foot Locker stock plummets on Q1 earnings miss, slashed guidance

Yahoo Finance Live discusses a drop in shares of Foot Locker as the company's Q1 earnings report fell below investor expectations.

Video transcript

BRAD SMITH: Let's get to some individual movers this morning. We have to start on Foot Locker, starting off Friday on the wrong foot, shares sinking after the company slashed its guidance for the year, as it struggles with declining sales. And now sees them falling 6 and 1/2 to 8% on an annual basis.

And as we continue to look through some of these numbers here, you're taking a look at the shares moving lower by 24% here, pre-market. There's a few things worth calling out here, number one this is a company that had laid out their lays out strategy. We brought that to your attention when they had announced that in about a quarter past year.

But they did mention their sales have since softened meaningfully since announcing that at their investor day in March. And they are citing a tough macroeconomic backdrop, causing them to reduce the guidance for the year as they take more aggressive markdowns. Not good, that means they're going to be discounting more, trying to drive demand, manage inventory, get through some of the inventory that they do have.

And I've been in a Foot Locker on about a weekly basis at this point, there's a lot of inventory in there. And on some of the SKUs that people might not necessarily gravitate towards the same way that they would, a drop that's taking place on one of the other DTC, or direct type of apps from the major manufacturers out there. The only other thing that I'll really call out here too, is the square footage.

The square footage needs to come down drastically. You think about the way that this company as well as other retailers are engaging with the consumer, and even the stat Heather was mentioning a moment ago, Foot Locker is a mall-heavy brand, always has been. And so that annexation of where the consumer has been able to access them for so long, it just means that number needs to continue to come down more, and they're guiding for it to come down by about 4% in that square foot.

JULIE HYMAN: There's one more really important thing to talk about here, and that is the new CEO, Mary Dillon, who just took over in September. And just looking at the analyst chatter around the implications of this negative report for her, some of the analysts saying this really does not get her era off on the right foot, that's according to an analyst over at Wedbush.

At the same time the analyst there saying we don't view this as an indictment of CEO, Mary Dillon, it's too early in her tenure for her to have made meaningful changes in the business. So that said, it's not like people are cutting them a break, if you look at how the shares are trading this morning. So this really puts the pressure on her to deliver going forward and improve things as she gets further into her tenure there.