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Foot Locker Overhauls Asia Business

Foot Locker shares got a lift in pre-market trading after the retailer revealed a strong Q4 performance and teased its long-term strategic plan.

In Q4, total sales decreased by 0.3%, beating the company’s expectations from Q3 that had sales down between 8% and 10%. Net income decreased to $19 million. Non-GAAP net income decreased to $92 million. Non-GAAP EPS decreased to $0.97 per share, ahead of analysts’ expectations of $0.51. Comparable-store sales increased 4.2%.

Foot Locker’s newly minted CEO Mary Dillon said the strong finish to the year was a result of “resilient holiday demand and a compelling assortment and inventory position from our brand partners.”

“We are entering 2023 with a focus on resetting the business – simplifying our operations and investing in our core banners and capabilities to position the company for growth in 2024 and beyond,” said Dillon, who later this morning will unveil long-term growth initiatives and financial targets at Foot Locker’s investor day presentation.

The Asia business is also getting an overhaul: Foot Locker said it would close all stores and e-commerce operations in Hong Kong and Macau and convert business to a licensed model in Singapore and Malaysia. In Indonesia, lifestyle retailer MAP Active will take over Foot Locker operations in Singapore and Malaysia and grow the company’s presence in new markets as well.

The retailer also outlined its guidance for the full fiscal year of 2023, and expects sales to be down between 3.5% and 5.5%. Comparable sales are expected to be down between 3.5% and 5.5%. Non-GAAP EPS is expected to be in the range of $3.35 and $3.65.

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Analysts predicted last week that an update on the company’s relationship with Nike will be a main theme of Monday’s meeting. Last year, Foot Locker said the amount of Nike product in its stores would be significantly less as the Swoosh accelerated its shift towards DTC sales. While this move initially caused the retailer to post a bleak outlook for 2022, Foot Locker still managed to churn out better-than-expected results for the third quarter, the first period in which the diminishment of Nike product was meant to be felt in stores.

What’s more, some industry analysts believe Nike might have been too bullish on DTC sales and might need to shore up its wholesale business, which could signal good news for Foot Locker.

“When brands discontinue retailers, they should not expect to get all that business back in DTC,” Matt Powell, an advisor at Spurwink River consultancy, previously said, noting how “Nike had to promote aggressively in 2022 to make up for the sales shortfall.”