In the first quarter of 2025, Foot Locker, Inc. reported a decrease in total sales by $86 million, or 4.6%, to $1,788 million compared to the corresponding prior-year period. Excluding the effect of foreign currency fluctuations, total sales decreased by $84 million, or 4.5%. The company's net loss for the period was $363 million, compared to a net income of $8 million in the same period last year. This significant change is primarily attributed to pre-tax charges of $276 million related to impairment and other expenses, and a valuation allowance and a write-off of deferred tax costs related to certain European businesses.
The company's gross margin rate decreased to 28.4% for the thirteen weeks ended May 3, 2025, compared to 28.8% in the corresponding prior-year period. This was driven by a 10 basis point decrease in the merchandise margin rate and a 30 basis point deleverage in the occupancy and buyers' compensation rate. The decrease in the merchandise margin rate was due to increased promotional activities to clear inventory in certain regions where the company exited operations, partially offset by better merchandise margins in other banners and higher vendor allowances.
Foot Locker, Inc. operates in three operating segments: North America, EMEA, and Asia Pacific. Sales in North America were negatively affected by the strategic decision to close underperforming stores, while sales in EMEA and Asia Pacific were impacted by macroeconomic headwinds and a competitive marketplace. Comparable sales decreased for the total company and within the stores channel due to ongoing macroeconomic headwinds and consumer discretionary spending, partially offset by increases in comparable sales within the direct-to-customer channel due to higher traffic and improved digital product launches.
The company's store count decreased to 2,363 stores as of May 3, 2025, compared to 2,410 and 2,490 stores at February 1, 2025, and May 4, 2024, respectively. Additionally, a total of 236 licensed stores were operating at May 3, 2025, as compared with 224 and 206 stores at February 1, 2025, and May 4, 2024, respectively, operating in the Middle East, Asia, and Europe.
Foot Locker, Inc. also announced an agreement and plan of merger with DICK'S Sporting Goods, Inc., subject to shareholder approval and other closing conditions, including regulatory approvals, expected to close in the second half of 2025.
In response to the challenging market conditions, the company presented certain financial measures identified as non-GAAP, such as sales changes excluding foreign currency fluctuations, adjusted income before income taxes, adjusted net income, and adjusted diluted earnings per share, to assist investors in understanding the changes in the business that are not related to currency movements and to better assess the company's progress in achieving its long-term financial objectives. As a result of these announcements, the company's shares have moved 0.17% on the market, and are now trading at a price of $24.16. Check out the company's full 10-Q submission here.
