Foot Locker Inc. (FL) shares slumped 12% as of 10:59 a.m. ET despite a positive second quarter, reflecting challenges for the retailers across the sector.
The drop comes just hours after a 2% rise in share price following the earnings, which beat on analyst estimates of both revenue, by $20 million.
Shares of New York-based retailer have had a very choppy year thus far, posting a strong January run, only to plummet by nearly 20% in March. Following that drop the retailer posted a remarkable bull run, increasing in value by about 30% heading into the summer to only again fall by about 20% by August.
It's been a roller-coaster, as Foot Locker tried to deal with the paradigm shifts in retail regarding online retail, direct to consumer programs as well as lower than expected same store sales.
"Our performance reflects the work we are doing on several fronts to position the company to succeed in a rapidly evolving retail environment," CEO Richard Johnson said in prepared remarks from the earnings presentation this morning, addressing the company's attempt to reposition as headwinds from online retail confront it.
As the company sources approximately two thirds of its products from Nike Inc. (NKE) alone, orienting the retail environment towards direct sales from manufacturers poses a significant threat, while online marketplaces only exacerbate already light foot traffic.
Johnson deflected the criticism by lauding his company's connection to its consumers.
"We've got deep, deep connections with our core consumers and our consumers truly enjoy being in the stores," he said. "They interact all of them interact with their digital device but they like the store environment."
He said that with the company's "power store" initiative to drive traffic, he is confident consumers will indeed visit physical locations.
Rather paradoxically, he also noted that traffic remained flat in the United States while decreasing in Europe.
Further, the company noted that its growth drivers outside of the US are not set to come into place until the fourth quarter.
Notably, Johnson explained that the company's global footprint is set to expand into Kuala Lumpur Malaysia and Singapore in the fourth quarter, which provides little relief in the short term.
To be sure, the company has endured similarly precipitous stock drops his year and bounced back in true rollercoaster fashion.
For example, its first quarter earnings release and slowed sales numbers led to a 12% drop on the release only to rebound sharply in the months afterward, presenting a buying opportunity in hindsight.
So, if the year thus far serves as any indicator, the company has the ability to recover from significant lows. Whether it still has that ability after today's battering will remain to be seen.