Foot Locker Inc.’s shares sank after the sneaker chain cut its full-year sales and profit forecasts, citing more discounts and a pullback in consumer spending ahead of the crucial holiday season.

The company said US shoppers became more frugal last quarter as they looked for better deals. That shift weighed on the retailer’s results and the prospects of its nascent turnaround.

“The consumer is being choosy, picky and smart, trying to find the best deals they can find,” Chief Executive Officer Mary Dillon said in an interview.

Dillon, who joined the company and became CEO a little more than two years ago, said that’s created a more promotional environment, which pushed the company take a more cautious view on its guidance. The chain’s sales have also been hurt by the company’s plan to close underperforming locations.

“Comparable sales need to be a lot stronger both to offset the impact of store closures and to convince investors that the strategy is working effectively,” Neil Saunders, managing director at GlobalData, wrote in a research note. “The reinvention is in its early days, and it is reasonable that delivery will be choppy until it becomes more established.”

The company’s shares fell as much as 20% on Wednesday, the biggest intraday drop since March. The stock had declined 22% this year through Tuesday’s close.
Dillon is looking to turn around Foot Locker by renovating a large portion of its store network, prioritizing a rewards program and revamping digital operations.

Nike relationship

The company has also worked to rebuild its relationship with Nike Inc., which had deemphasized its retail partners in favor of its own stores and website. The pair developed a new basketball section for Foot Locker stores called Home Court, which the retailer is now rolling out to 100 shops globally by 2026.

Dillon said footwear is performing stronger than apparel, led by brands including Adidas, Nike, Hoka, Asics and Ugg.

During last quarter, consumers held back spending after the back-to-school period in August, though purchases accelerated over the Thanksgiving rush, Dillon said.
Comparable store sales, a key retail metric, rose 2.4% for the third quarter ended November 2. That fell short of the 2.8% that analysts expected.

The footwear chain expects sales to fall as much as 1.5% for the full fiscal year that runs through February 1, a 0.5 percentage point cut from previous guidance. It sees earnings per share at a range of $1.20 to $1.30, down from as much as $1.70.