Foot Locker Inc. reported a modest decline in profits in the first quarter as both earnings and sales fell short of Wall Street’s estimates.

First Quarter Results
Net income for the company’s first quarter ended April 29, 2017 was $180 million, or $1.36 per share, compared with net income of $191 million, or $1.39 per share, in the same period of 2016. Wall Street’s consensus estimate had been $1.38.

First-quarter comparable-store sales increased 0.5 percent. Total sales increased 0.7 percent, to $2 billion this year, compared with sales of $1.99 billion for the corresponding prior-year period. The Street’s consensus estimate was $2.02 billion. Excluding the effect of foreign currency fluctuations, total sales for the first quarter increased 1.8 percent. The company’s gross margin rate decreased to 34 percent of sales from 35 percent a year ago, and the selling, general, and administrative expense rate increased 30 basis points to 18.5 percent of sales.

“The first quarter was one of our most profitable quarters ever, but it did fall short of our original expectations,” said Richard Johnson, chairman of the board and chief executive officer. “The slow start we experienced in February, which we believe was largely due to the delay in income tax refunds, was unfortunately not fully offset by much stronger sales in March and April. Nonetheless, we believe our banners remain at the center of a vibrant sneaker culture. We are confident that our customers have not lost their tremendous appetite for athletic footwear and apparel and that our position in the industry is stronger than ever.”

Financial Position
At April 29, 2017, the company’s merchandise inventories were $1,279 million, 1.5 percent higher than at the end of the first quarter last year. Using constant currencies, inventory increased 2.8 percent. The company’s cash totaled $1,049 million, while the debt on its balance sheet was $127 million. The company spent $38 million to repurchase 546 thousand shares during the quarter and paid a quarterly dividend of 31 cents per share.

“Our overall financial position remains very strong,” said Lauren Peters, executive vice president and chief financial officer. “In addition, the tight inventory discipline we have maintained over the last several years is serving us well now, because even with first quarter sales that ran below expectations, we believe our inventory is still well positioned to drive improved top line results over the balance of the year. At the same time, we are aggressively reviewing and implementing opportunities to lower expenses as we work to achieve a mid-single digit EPS increase for the full year.”

Store Base Update
During the first quarter, the company opened 30 new stores, remodeled or relocated 61 stores and closed 39 stores. As of April 29, 2017, the company operated 3,354 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, 62 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 15 franchised Runners Point stores in Germany.