Foot Locker, Inc. (NYSE:FL) Q3 2022 Earnings Call Transcript

Mary Dillon : Tom, thank you for the question. So overall, I would say, high level, our diversification strategy remains on track. But I’d also say that probably moving towards more of a soft landing, I guess, if you will. So our Nike mix was down in the third quarter. We expect it to be down in the fourth quarter, but just to a lesser extent, I guess, I’d say that we originally expected. And beyond that, yes, we can — we will see the mix continue to mix down to around that 55% of sales that we spoke about but I’d say just be more gradual about it. And as we see a steady increase in other brands, and that’s how it’s playing out.

Tom Nikic : Got it. And just a quick follow-up. Obviously, you’re calling for much less of a comp decline in Q4 than what you were sort of communicating earlier this year. Is that primarily because you’re not having the hard landing with Nike? Or is it also because the non-Nike brands are outperforming your expectations and expect — you expect them to do better in the fourth quarter than what you previously thought?

Mary Dillon : Yes, I’d say all of the above. I mean the good news is the consumer, the customer at Foot Locker is showing great resilience and momentum for the category and for the array of brands that we’re offering. So it really is a combination of some of our other brands, a number of brands that we’re partnering with to continue to have even more momentum than we might have predicted and then somewhat more partnership that we’re seeing with Nike in the quarter in terms of some of these demand signals that we’re seeing in the marketplace. So together, that gives us confidence for the quarter.

Operator: The next question comes from Kate McShane of Goldman Sachs.

Kate McShane : Mary, you had mentioned one of your priorities that you were focused on was deepening your online penetration. But I know that you do have a customer that does tender quite a bit with cash still. So I wondered if you had any thoughts around any kind of limitations to the online penetration because of that and how do you address it?

Mary Dillon : Kate, thank you for the question. What’s really true of this category is that both brick-and-mortar and online matter. That’s for sure for our customers. So we see our best guests are buying in both channels for different reasons, right? Sometimes it’s to go in and try and explore. Sometimes people are paying with cash and that’s not the majority, but sometimes. But then also, everybody knows that there’s a digital experience that surrounds every decision that people make in every category, but certainly in sneakers. So for us, I don’t know that there’s a limitation. I mean, right now, I think we’re still in the early innings of how is up on our online penetration. We know that there’s, frankly, improvements that we can do in the overall experience, and we’re focused on that. And so I don’t have a specific target in terms of where I see it going, but it will definitely be higher than today. And again, the best guests will engage in both channels.

Kate McShane : Okay. And then I had a question for Andrew. Just with regards to the savings program, how we should be thinking about the cadence of the $200 million in savings over time?

Andrew Page : Yes. Thanks, Kate. I appreciate it. Yes. As I’ve mentioned in my prepared remarks, that our savings program, it’s wide-ranging, a very large scope. We’ll see approximately $18 million of SG&A pickup this year. We still see a realization of the $200 million savings. It’s going to be a little longer than anticipated. I would expect that it’s going to go a little bit beyond 2023, probably realizing in 2024. But it is a very extensive program, picking up traction in 2023 and fully realized beyond 2023.

Operator: The next question comes from John Kernan of Cowen.