Foot Locker cuts staff and another exec departs: 'Every executive from the 2019 analyst day is now gone,' analyst says
By Bill Peters
CEO Mary Dillon is 'putting her stamp on the biz,' Wedbush says
Athletic-gear retailer Foot Locker Inc. on Thursday said it was cutting some of its corporate and support staff and has decided to wind down its Sidestep athletic fashion brand in Europe.
The retailer also said that Andrew Gray, executive vice president of Global Lockers and Champs Sports, left the company on Jan. 23, marking the latest executive departure over the past several years.
Champs Sports operates under Foot Locker's umbrella. Sidestep runs several dozen stores throughout a handful of nations in Europe, where a spike in energy prices has created a cost-of-living crisis for many.
Foot Locker (FL) disclosed the moves in a filing, amid falling sales for the company following a big jump in 2021, when the economy's reopening and pandemic-related stimulus helped boost consumer spending. The company did not say how many people would lose their jobs. The cuts, it said, were geared toward "streamlining the organization and enhancing operational efficiency."
Foot Locker said it expected the staff eliminations to save around $18 million starting in fiscal 2023. The company had 16,555 full-time employees and 33,378 part-timers as of Jan. 29, 2022.
Foot Locker was not immediately available for comment. Shares jumped 6.4% on Thursday, finishing at their highest level since last February.
Wedbush analyst Tom Nikic, in a note on Thursday, said the cuts and the decision to wind down Sidestep were a sign of new Chief Executive Mary Dillon "putting her stamp on the biz."
"New CEO Mary Dillon has been very active since coming aboard last year, shuttering less-productive banners (e.g. Eastbay) and shuffling the executive ranks," he said.
He also noted that in March 2019, for the company's analyst day, nine members of Foot Locker's executive team laid out their vision for the company. With Gray's departure, he said, "every executive from the 2019 analyst day is now gone."
The decision to cut staff follows a year of turmoil for retail executives, many of whom had to slash prices on clothing and other goods inflation forced shoppers to dedicate more of their money toward buying essentials. In September, Nike Inc. (NKE) -- which has moved away from Foot Locker and other retailers in favor of selling in its owns stores and online -- said it expected margins to take a hit for the rest of its fiscal year, which ends in May, as it cut prices on clothing.
However, Foot Locker has relied heavily on Nike for sales. In 2021, it bought around 68% of its merchandise from Nike, according to Foot Locker's most recent annual report. In February, the company said that it did "not expect any one vendor to represent more than 55% of total supplier spend" starting in the fourth quarter of 2022.
When Foot Locker reported third-quarter results in November, the company gave a slightly more upbeat sales outlook for 2022. But executives still expected the retailer to finish 2022 with a sales decline, and noted that the "macroeconomic environment remains uncertain."
Nikic said Foot Locker was due for such a shake-up. But he said, "Our enthusiasm is tempered by the ongoing evolution of the Nike partnership (reduced allocations could be a 2023 headwind) and macro headwinds."
Foot Locker shares are down 5% over the past 12 months. The S&P 500 Index has fallen 7% over that time.
-Bill Peters
(END) Dow Jones Newswires
January 27, 2023 08:25 ET (13:25 GMT)
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