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Foot Locker (FL) Up on Q3 Earnings: Will the Momentum Last?
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Investors gave thumbs up to Foot Locker, Inc. (FL - Free Report) after this operator of athletic shoes and apparel retailer posted better-than-expected third-quarter fiscal 2017 results. Consequently, the shares of this Zacks Rank #3 (Hold) company zoomed 28.2% during the trading session on Nov 17. This led the stock to gain 29.1% in a month, compared with the industry’s increase of 10.4%.
Clearly, the third-quarter results gave a fresh breath of life to the stock, which in the recent past had struggled to win investors’ confidence on account of dismal performance in the preceding two quarters. However, analysts believe that the euphoria surrounding the stock may be short lived as Foot Locker continues to register year-over-year decline in both the top and bottom lines.
Nevertheless, given the tough retail scenario Foot Locker is effectively managing inventory, investing in digital platforms, improving supply chain efficiencies along with reorganizing corporate and division staff. The company also entered into a partnership with Nike for a pop-up store called Sneakeasy NYC.
Let’s Delve Deep
The New York-based retailer delivered adjusted earnings of 87 cents a share that beat the Zacks Consensus Estimate of 80 cents by 8.8%, after witnessing negative earnings surprises of 31.1% and 1.5% in the third and second quarter, respectively. However, earnings per share plunged 23% year over year, following a decline of 34% in the second quarter.
Foot Locker generated total sales of $1,870 million that came ahead of the Zacks Consensus Estimate of $1,843 million, after missing the same in the preceding four quarters. However, the top line decreased 0.8% year over year, after sliding 4.4% in the second quarter. Excluding the impact of foreign currency fluctuations, total sales dropped 2.3%. Third-quarter comparable-store sales fell 3.7%, following a decline of 6% in the preceding quarter.
Direct-to-customer comparable sales increased 6.1%, while at stores the same declined 5.1%. Eastbay witnessed a high single-digit increase in the top line. The company’s store banner dot-com businesses both in the United States and Europe increased in mid-single-digit, while digital sales in Canada rose at a double-digit rate.
Gross margin contracted 290 basis points to 31% of sales primarily due to fall in merchandise margin on account of higher markdowns to pull traffic and clear slow-moving inventory. SG&A expense rate increased 30 basis points to 19.7% during the quarter.
Foot Locker, Inc. Price, Consensus and EPS Surprise
During the quarter under review, Foot Locker opened 12 new outlets, remodeled or relocated 41 outlets, and shuttered 22 outlets. The company plans to open 90 stores, relocate or remodel 180 stores, and shutter 150 locations (up from 135 previously expected) during fiscal 2017.
As of Oct 28, 2017, the company operated 3,349 outlets across 23 countries in North America, Australia, New Zealand and Europe. Apart from these, there are 83 franchised Foot Locker stores in the Middle East. Germany has 14 franchised Runners Point stores.
Other Financial Details
Foot Locker ended the quarter with cash and cash equivalents of $890 million, long-term debt and obligations under capital leases of $126 million, and shareholders’ equity of $2,657 million. During the quarter, the company repurchased 8.69 million shares of worth $304 million and paid a quarterly dividend of 31 cents a share.
Management incurred capital expenditures of $54 million during the quarter, and remains on track to spend approximately $277 million in the fiscal year.
Outlook
Management now expects comparable sales to decline in the band of 2-4% during the fourth quarter compared with previous guidance of down 3-4%. On a 13-week basis, gross margin is likely to shrivel 220-240 basis points in the final quarter due to higher markdowns. SG&A expense rate is expected to increase by 60-80 basis points. Further, Foot Locker now envisions earnings per share to decline in the range of 15-25% in the fourth quarter. The guidance excludes the 53rd week, which is likely to benefit the bottom line by 12 cents a share.
Interested in Retail Space? Check These 3 Trending Stocks
Dollar Tree, Inc. (DLTR - Free Report) has a long-term earnings growth rate of 13.2% and a Zacks Rank #2.
Ross Stores, Inc. (ROST - Free Report) pulled off an average positive earnings surprise of 5.5% in the trailing four quarters. It has a long-term earnings growth rate of 10% and a Zacks Rank #2.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Foot Locker (FL) Up on Q3 Earnings: Will the Momentum Last?
Investors gave thumbs up to Foot Locker, Inc. (FL - Free Report) after this operator of athletic shoes and apparel retailer posted better-than-expected third-quarter fiscal 2017 results. Consequently, the shares of this Zacks Rank #3 (Hold) company zoomed 28.2% during the trading session on Nov 17. This led the stock to gain 29.1% in a month, compared with the industry’s increase of 10.4%.
Clearly, the third-quarter results gave a fresh breath of life to the stock, which in the recent past had struggled to win investors’ confidence on account of dismal performance in the preceding two quarters. However, analysts believe that the euphoria surrounding the stock may be short lived as Foot Locker continues to register year-over-year decline in both the top and bottom lines.
Nevertheless, given the tough retail scenario Foot Locker is effectively managing inventory, investing in digital platforms, improving supply chain efficiencies along with reorganizing corporate and division staff. The company also entered into a partnership with Nike for a pop-up store called Sneakeasy NYC.
Let’s Delve Deep
The New York-based retailer delivered adjusted earnings of 87 cents a share that beat the Zacks Consensus Estimate of 80 cents by 8.8%, after witnessing negative earnings surprises of 31.1% and 1.5% in the third and second quarter, respectively. However, earnings per share plunged 23% year over year, following a decline of 34% in the second quarter.
Foot Locker generated total sales of $1,870 million that came ahead of the Zacks Consensus Estimate of $1,843 million, after missing the same in the preceding four quarters. However, the top line decreased 0.8% year over year, after sliding 4.4% in the second quarter. Excluding the impact of foreign currency fluctuations, total sales dropped 2.3%. Third-quarter comparable-store sales fell 3.7%, following a decline of 6% in the preceding quarter.
Direct-to-customer comparable sales increased 6.1%, while at stores the same declined 5.1%. Eastbay witnessed a high single-digit increase in the top line. The company’s store banner dot-com businesses both in the United States and Europe increased in mid-single-digit, while digital sales in Canada rose at a double-digit rate.
Gross margin contracted 290 basis points to 31% of sales primarily due to fall in merchandise margin on account of higher markdowns to pull traffic and clear slow-moving inventory. SG&A expense rate increased 30 basis points to 19.7% during the quarter.
Foot Locker, Inc. Price, Consensus and EPS Surprise
Foot Locker, Inc. Price, Consensus and EPS Surprise | Foot Locker, Inc. Quote
Store Update
During the quarter under review, Foot Locker opened 12 new outlets, remodeled or relocated 41 outlets, and shuttered 22 outlets. The company plans to open 90 stores, relocate or remodel 180 stores, and shutter 150 locations (up from 135 previously expected) during fiscal 2017.
As of Oct 28, 2017, the company operated 3,349 outlets across 23 countries in North America, Australia, New Zealand and Europe. Apart from these, there are 83 franchised Foot Locker stores in the Middle East. Germany has 14 franchised Runners Point stores.
Other Financial Details
Foot Locker ended the quarter with cash and cash equivalents of $890 million, long-term debt and obligations under capital leases of $126 million, and shareholders’ equity of $2,657 million. During the quarter, the company repurchased 8.69 million shares of worth $304 million and paid a quarterly dividend of 31 cents a share.
Management incurred capital expenditures of $54 million during the quarter, and remains on track to spend approximately $277 million in the fiscal year.
Outlook
Management now expects comparable sales to decline in the band of 2-4% during the fourth quarter compared with previous guidance of down 3-4%. On a 13-week basis, gross margin is likely to shrivel 220-240 basis points in the final quarter due to higher markdowns. SG&A expense rate is expected to increase by 60-80 basis points. Further, Foot Locker now envisions earnings per share to decline in the range of 15-25% in the fourth quarter. The guidance excludes the 53rd week, which is likely to benefit the bottom line by 12 cents a share.
Interested in Retail Space? Check These 3 Trending Stocks
Big Lots, Inc. (BIG - Free Report) delivered an average positive earnings surprise of 81.1% in the trailing four quarters. The company has a long-term earnings growth rate of 13.5% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dollar Tree, Inc. (DLTR - Free Report) has a long-term earnings growth rate of 13.2% and a Zacks Rank #2.
Ross Stores, Inc. (ROST - Free Report) pulled off an average positive earnings surprise of 5.5% in the trailing four quarters. It has a long-term earnings growth rate of 10% and a Zacks Rank #2.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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