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(Reuters) -Shares of Foot Locker (NYSE:FL) cratered about 35% on Wednesday, and dragged down those of its rivals, after the retailer lowered its annual forecasts as it reels from weaker consumer demand in the face of still-high inflation.
The athletic-wear retailer, which also missed quarterly sales expectations, said it would pause its quarterly dividend payouts beyond October, and flagged softer demand in July — typically when back-to-school shopping starts.
The lowered 2023 forecast would help “compete for price-sensitive consumers”, according to Foot Locker CEO Mary Dillon.
The company had in May said it would bank on higher discounts to appeal to inflation-pinched back-to-school shoppers.
A Deloitte report showed that spending on apparel was likely to fall 14% as back-to-school shoppers prioritized essentials.
“The athletic segment has broadly slowed in the U.S… Foot Locker on top of that has company-specific issues with the repositioning of its banners, mainly Champs, which is further dragging results,” said Cristina Fernandez, analyst at Telsey Advisory Group.
The weak forecast from Foot Locker dragged shares of peers Nike (NYSE:NKE), Dick’s Sporting Goods (NYSE:DKS) and Under Armour (NYSE:UA) down between 2% and 4%. Shares of European peers Adidas (OTC:ADDYY) and Puma skid 4% to 6%.
Dick’s Sporting Goods on Tuesday also cut its full-year profit targets, slammed by hits to its margins from retail theft.
Foot Locker’s second quarter also took a hit from inventory shrink, or retail theft, and steeper discounts. Its gross margins slumped 460 basis points.
The company expects sales to fall 8.0% to 9.0% this year, compared with its previous forecast of a drop of 6.5% to 8.0%.
It trimmed annual earnings per share forecast to $1.30-$1.50 from $2.00-$2.25.
