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Can Foot Locker (FL) Sustain Its Recent Rally in 2018?
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Of late, shares of Foot Locker, Inc. (FL - Free Report) are riding high on better-than-expected third-quarter fiscal 2017 results and effective implementation of operational and financial initiatives. In the past three months, the stock has gained 36.7%, outperforming the industry’s growth of 24.8%. Let’s delve deeper.
Hidden Catalyst
Clearly, the third-quarter results provided a fresh breath of life to the stock, which in the recent past had struggled due to dismal performance in the preceding two quarters. Let’s look at Foot Locker earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company. In the past 60 days, the Zacks Consensus Estimate for fourth quarter and fiscal 2017 has increased by 4.2% and 3.3% to $1.23 and $4.08, respectively. Further, for fiscal 2018 earnings estimates have jumped by 5.1% to $3.95 per share.
We believe that continuous exploitation of opportunities such as children’s business, shop-in-shop expansion, store refurbishment and enhancement of assortments are likely to benefit the company in the long run.
International expansion, especially in Europe, is another catalyst. The company is also focusing on augmenting e-commerce platform, growing direct-to-consumer operations, margin expansion and tapping underpenetrated markets. Direct-to-customer comparable sales increased 6.1% in third quarter fiscal 2017. Direct-to-customer sales rose to 13.8% of total sales during the quarter, up from 12.8% a year ago. 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.
Further, the Zacks Rank #2 (Buy) company 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. The company's long-term financial goals include attaining sales of $10 billion, sales per gross square foot of $600, operating margin of 12.5%, net income margin of 8.5%, and return on invested capital of 17%.
However, Foot Locker’s dwindling top and bottom-line results remain the primary concern. Challenging retail landscape and changing consumer spending pattern are making operating environment tough. We noted that earnings per share plunged 23% year over year during third-quarter 2017, following a decline of 34% and 2.2% in the second and first quarter, respectively.
G-III Apparel Group has a long-term earnings growth rate of 15%.
Michael Kors Holdings has reported positive earnings surprise in the trailing four quarters, with an average of 23.7%.
Lululemon Athletica has surpassed the Consensus mark in the trailing four quarter, with an average beat of 8.1%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Can Foot Locker (FL) Sustain Its Recent Rally in 2018?
Of late, shares of Foot Locker, Inc. (FL - Free Report) are riding high on better-than-expected third-quarter fiscal 2017 results and effective implementation of operational and financial initiatives. In the past three months, the stock has gained 36.7%, outperforming the industry’s growth of 24.8%. Let’s delve deeper.
Hidden Catalyst
Clearly, the third-quarter results provided a fresh breath of life to the stock, which in the recent past had struggled due to dismal performance in the preceding two quarters. Let’s look at Foot Locker earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company. In the past 60 days, the Zacks Consensus Estimate for fourth quarter and fiscal 2017 has increased by 4.2% and 3.3% to $1.23 and $4.08, respectively. Further, for fiscal 2018 earnings estimates have jumped by 5.1% to $3.95 per share.
We believe that continuous exploitation of opportunities such as children’s business, shop-in-shop expansion, store refurbishment and enhancement of assortments are likely to benefit the company in the long run.
International expansion, especially in Europe, is another catalyst. The company is also focusing on augmenting e-commerce platform, growing direct-to-consumer operations, margin expansion and tapping underpenetrated markets. Direct-to-customer comparable sales increased 6.1% in third quarter fiscal 2017. Direct-to-customer sales rose to 13.8% of total sales during the quarter, up from 12.8% a year ago. 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.
Further, the Zacks Rank #2 (Buy) company 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. The company's long-term financial goals include attaining sales of $10 billion, sales per gross square foot of $600, operating margin of 12.5%, net income margin of 8.5%, and return on invested capital of 17%.
However, Foot Locker’s dwindling top and bottom-line results remain the primary concern. Challenging retail landscape and changing consumer spending pattern are making operating environment tough. We noted that earnings per share plunged 23% year over year during third-quarter 2017, following a decline of 34% and 2.2% in the second and first quarter, respectively.
Other Stocks to Consider
Other top-ranked stocks, which warrant a look in the same sector include G-III Apparel Group, Ltd. (GIII - Free Report) , Michael Kors Holdings Limited and Lululemon Athletica Inc. (LULU - Free Report) . All these stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
G-III Apparel Group has a long-term earnings growth rate of 15%.
Michael Kors Holdings has reported positive earnings surprise in the trailing four quarters, with an average of 23.7%.
Lululemon Athletica has surpassed the Consensus mark in the trailing four quarter, with an average beat of 8.1%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>