Foot Locker faced a devastating 32% plunge in its stock price as it reported dismal second-quarter earnings, attributing the downturn to what it called “ongoing consumer softness.”

In its latest earnings report released on Wednesday, Foot Locker revealed a staggering 9.9% drop in sales, bringing its quarterly revenue down to $1.8 billion, a notable decline from the $2.1 billion reported during the same period the previous year.

As a direct consequence, Foot Locker’s share price took a nosedive in premarket trading, plummeting by as much as 32.8% to a low of $15.60.

The company, headquartered in New York, had no choice but to revise its yearly forecast downward due to what it described as “the still-tough consumer backdrop.” Now, it anticipates a sales decrease of 8% to 9% for the year, down from the initial prediction of 6.5% to 8%.

Foot Locker’s Chief Executive, Mary Dillon, expressed her concerns, stating, “We did see a softening in trends in July and are adjusting our 2023 outlook to allow us to best compete for price-sensitive consumers.”

Furthermore, Foot Locker’s yearly earnings outlook also witnessed a substantial reduction, with the company now projecting earnings per share between $2 and $2.25. This is a significant drop from the initial forecast of $3.35 to $3.65 per share and falls considerably short of the $3.47 that analysts had expected.

The root cause of this downturn, as Foot Locker reported, is the persistent “consumer softness,” which has led to decreased consumer spending on their products.

Retail struggle

This announcement comes in the wake of similar struggles in the retail industry. Macy’s, another iconic department store, reported declining sales in its second-quarter earnings, which it attributed to diminishing consumer spending and an increase in credit card delinquencies. Macy’s net sales for the period fell from $5.6 billion in the previous year to $5.1 billion.

In-store sales at Macy’s also took a hit, dropping 8%, and digital sales decreased by 10% compared to the same period last year. This disappointing performance caused Macy’s stock to tumble by over 14% to $12.57.

Meanwhile, Target experienced its first quarterly sales drop in six years, with sales down 5.4% from the previous year, including a 10.5% decline in digital sales. Target’s CEO, Brian Cornell, attributed part of the losses to inflation and boycotts of the retailer’s controversial “Pride” collection.

Another retail giant, Dick’s Sporting Goods, reported a 23% drop in profits despite a 3.6% increase in sales, citing “organized retail crime” and inventory shrink as the primary reasons for the disappointing results.

The common thread among these retailers is the challenging environment characterized by consumer reluctance to spend, which is impacting their bottom lines and stock performance. As these companies grapple with these challenges, they are left with the task of finding innovative ways to adapt to the evolving consumer landscape.