By Mackenzie Tatananni

Foot Locker stock spiked Wednesday after management quashed concerns about weak guidance during a conference call to discuss the sneaker retailer's fourth-quarter sales miss.

While adjusted earnings of 86 cents a share in the fourth quarter topped analysts' calls for 72 cents, total sales of $2.24 billion missed expectations of $2.32 billion, according to FactSet.

Total sales for the fourth quarter decreased by 4.6%, excluding the effect of foreign exchange rate fluctuations, while comparable-store sales jumped 2.6% in the period. Foot Locker noted that the fourth quarter of 2023 was a week longer than 2024.

The retailer also issued its fiscal-year guidance for the year ending Jan. 31, 2026, saying it anticipates sales to grow between 0.5% and 1%. Foot Locker forecast earnings in the range of $1.35 to $1.65 a share, missing analysts' calls for $1.72 a share at the midpoint.

The outlook factors in the effect of tariffs, CEO Mary Dillon said during the earnings call Wednesday.

Shares of Foot Locker were up 9.7% to $19.05 after fluctuating in premarket trading.

Dillon lauded the company's return to positive comp sales and gross margin expansion in the fourth quarter.

"Looking ahead, we will continue to prioritize our customer-facing investments, keep our inventories controlled, and manage our expense base with discipline to improve our profitability," Dillon said.

However, she conceded that consumer and category promotional pressures will "remain uncertain into 2025, especially within the first half."

While management acknowledged this pain point during the earnings call, the commentary evidently quelled some investor worry .

"Our customers are young. By definition, they're more limited in their discretionary budgets," Dillon explained. "They prioritize their lives. But we're watching as they're thinking about overall cost of living, plus some uncertainty about tariffs."

While consumer uncertainty begin to pick up in February, resulting in "choppy performance" and a softer start to the year, customers responded well to key promotions like All Star Weekend activations and an online Valentine's Day shop.

"We're seeing consumers respond to come out to spend during compelling activations, key shopping events and product launches or new events," Dillon explained. "They spend when there's a call to action, but they're more cautious in those in-between periods."

Foot Locker has taken this into account, she continued, by adjusting its capital and spending plans to prioritize areas where it's generating the strongest returns on investment.

Mike Baughn, the company's chief financial officer, noted that several years of store closures, coupled with investments in remaining locations, set the company up for positive comps and competitive share gains over time.

"2025 will be a year where we've appropriately re-baselined into a healthier store fleet size, from which we can operate in the near term and grow in the future," Baugh said.

Management also stressed Foot Locker's Lace Up plan, a long-term growth strategy that was first announced in 2023.

The approach, which includes a broadening of its sneaker offerings and opening of new-format stores, appears to be paying off, in Dillon's view.

"We know our Lace Up strategies are working and our customers are responding really well to those," the CEO said. "So we're going to continue to drive those this year, whether it's the store improvements, digital, loyalty, et cetera."

The company plans to balance this with its "near and longer-term business needs" as it makes investments, which will "position us to continue to deliver on the top line, while also continuing to make progress toward our longer term financial goals," Dillon said.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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March 05, 2025 10:14 ET (15:14 GMT)

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