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To the list of headwinds facing American retailers, add delayed tax refunds.
Foot Locker, the athletic footwear retailer, issued a surprise profit warning on Thursday, after first quarter sales was “significantly” impacted by delays its shoppers are seeing in getting back their income tax refund this year. Shares fell by as much as 4 per cent in pre-market trading.
“We mentioned on our 2016 earnings conference call on February 24th that the first quarter of 2017 would be challenging, based on the slower than usual start in the United States,” said chief executive Richard Johnson.
“We believe the delay in the issuance of the vast majority of income tax refund checks until after the NBA All-Star Game signifcantly affected our February comparable store sales, which were down low-double digits.”
While the New York-based company said March sales rebounded well, the weak first quarter means it now expects full year earnings per share to increase in the mid-single digits, compared to the double-digit growth it had forecast back in February.
The guidance cut is something of a rare misstep for Foot Locker, which has managed to buck much of the malaise that has shaken the wider retail sector last year thanks to robust demand for high end basketball and running shoes.
Disappointing results at big-box chains like Target, as well as department stores like Macy’s and apparel chains like Gap, have caused a sell-off across the industry and forced many well known brands to file for bankruptcies or shutter stores.
By contrast, Foot Locker, posted record sales and profit for the fiscal fourth quarter, which ended on January 28 and its shares hit an all time high of $79.43 in December. They closed at $72.65 on Wednesday.
With the US Internal Revenue Service more closely scrutinising tax returns that include earned income tax credit claims this year, shoppers are having to wait longer than usual for their tax refunds.
According to one estimate, more than 13m low-to-moderate-income Americans claimed the credit in 2012. This means Foot Locker probably won’t be the last retailer to blame tax refund delays for their earnings miss this reporting season.
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