Yes, you heard me correctly. Is Foot Locker ($FL) the next in line to file Chapter 11?
We think it’s heading that way. Why?
- Foot Locker said they are closing more than 400 stores by 2026.
- Gross margin is now lower than previous outlook (from 30.8% – 31% to 28.6% – 28.8%).
- More aggressive markdowns indicating that they are struggling.
- Significantly lower EPS ($3.35 – $3.65 to $2 – $2.25). That’s almost 50% lower!
- A questionable leadership hiring…they hiring an executive from Kohl’s ($KSS) that’s also not doing well.
- Comparable store sales went down by 9.1%
- A mere $36 million in profit
- Continued problem with theft
On the other hand
- Nike’s ($NKE) DTC‘s share of the total revenue went from 16% to 35% and is continuing to grow reducing the reliance of middlemen like Foot Locker and turning more of them into a show room.
- Adidas plans for direct to consumer to make up 50% of net sales by 2025.
- More sneaker companies will announce shift from wholesale to DTC
How is Foot Locker’s e-commerce experience? Oh, boy…it’s dismal.
Go to trustpilot’s website. They simply can’t deliver a basic experience so e-commerce for them is a mess (1.5 stars and many wanting to give 0-star rating), brick-and-mortar is a mess, sneaker companies are abandoning them and they are going to start losing money very quickly.
So my take, have a short position like I did before the earnings and make a fortune. I think it will head below$10 by end of this year. But again, before you make any investment decisions, do your DD.