Shares of Foot Locker (NYSE: FL) are getting hammered in Wednesday’s trading. The footwear and apparel retailer’s share price was down 32.3% as of 10:15 a.m. ET today, according to data from S&P Global Market Intelligence.
Foot Locker published its second-quarter results before the market opened this morning, showing sales and earnings that fell short of the market’s expectations. While the average analyst estimate had called for the company to deliver adjusted earnings per share of $0.05 on revenue of $1.88 billion, the business actually posted adjusted earnings of $0.04 on sales of $1.86 billion in the period.
Foot Locker’s revenue fell 9.9% year over year in the second quarter, and total same-store sales were down 9.4% compared to the prior-year period. The retailer said that it continued to face a challenging economy and that price sensitivity among customers was still creating headwinds.
But while the sales and earnings misses in the quarter were undoubtedly disappointing, the report was paired with even worse news. Not only is Foot Locker suspending its dividend, it also issued another round of downward revisions for this year’s sales and earnings guidance.
Foot Locker now expects sales to decline between 8% and 9% this year, worse than its previous guidance for a revenue drop-off between 6.5% and 8%. Meanwhile the company anticipates that same-store sales will decline between 9% and 10%, worse than its previous target for a decline between 7.5% and 9%.
Management also cut its guidance for adjusted earnings per share (EPS) between $2 and $2.25 to a range of $1.30 to $1.50 in EPS. Notably, the company initially forecast that it would see adjusted EPS between $3.35 and $3.65 this year.
Following today’s big sell-off, Foot Locker is now trading at roughly 11 times the midpoint value of its new earnings guidance. The stock might look cheap at current prices, but sales and earnings are heading in the wrong direction, and the dividend suspension suggests that the company is facing some financial strain.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Foot Locker. The Motley Fool has a disclosure policy.
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