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Foot Locker (FL) Stock Grapples With Several Headwinds
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Foot Locker, Inc. (FL - Free Report) appears to be a weak performer for a while now due to several headwinds. A tough operating landscape, including inflationary pressures, foreign currency headwinds and other woes are weighing on the company’s performance. Consequently, the company posted dull first-quarter fiscal 2023 results and issued a bleak outlook for the current fiscal year.
Such limitations have caused this Zacks Rank #5 (Strong Sell) company’s shares to decline 31.2% in the year-to-date period, wider than the industry’s 3.2% fall.
Let’s Delve Deeper
Apart from the aforesaid headwinds, a slowdown in consumer spending and supply-chain woes have been weighing on the company’s performance. Markdowns to optimize inventory levels and an elevated promotional environment have been hurting the company’s margins. It has been witnessing higher selling, general and administrative (SG&A) expenses for a while now.
In first-quarter fiscal 2023, Foot Locker’s sales and earnings fell short of the Zacks Consensus Estimate, with both the metrics declining year over year. The company posted adjusted earnings of 70 cents per share, which missed the consensus estimate of adjusted earnings of 78 cents per share.
Image Source: Zacks Investment Research
FL registered total sales of $1,931 million, which came below the consensus estimate of $1,995 million. Excluding foreign currency fluctuation impacts, total sales declined 10%. Comparable-store sales (comps) also inched down 9.1% due to macroeconomic headwinds, including lower income tax refunds in the United States, the changing vendor mix and the repositioning of Champs Sports.
Consequently, management trimmed the outlook for fiscal 2023. For the current fiscal year, management expects sales to decline 6.5-8%, including 1% from the extra week and the comps to fall 7.5-9% year over year. The gross margin is anticipated in the range of 28.6-28.8% compared with the prior view of 30.8-31%. The SG&A rate is forecast at 22.4-22.6%.
Management stated that the EBIT margins will decline significantly in fiscal 2023. Further, the gross margin will decline by 310-330 basis points on higher markdown activity, incremental occupancy deleverage and an increase in theft-related shrink. Further, the company’s overall store count is likely to decline by 9% in 2023.
The company envisions fiscal 2023 adjusted earnings per share decreasing 57% to $2.00-$2.25, down from $4.95 recorded last fiscal year. For the fiscal second quarter also, management anticipates comparable sales to decline in the high-single digits, compared with its previous expectations of a mid-single digits decline.
Given the aforesaid negatives, we remain cautious about the stock in the near term. A Growth Score of D further adds to the weakness. The Zacks Consensus Estimate for fiscal 2023 sales and earnings per share (EPS) is currently pegged at $8.1 billion and $2.09, respectively. These represent corresponding year-over-year decreases of 7.3% and 57.8%.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Urban Outfitters (URBN - Free Report) and American Eagle Outfitters (AEO - Free Report) .
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 3.4% and 732%, respectively, from the year-ago reported figures. ANF delivered an average trailing four-quarter earnings surprise of 480.6%.
Urban Outfitters, a sporting goods retailer, currently sports a Zacks Rank of 1. The company has an average trailing four-quarter earnings surprise of 12.2%.
The consensus estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 5.1% and 57.1%, respectively, from the year-ago reported figures.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO delivered an average trailing four-quarter earnings surprise of 9.2%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 4.1%, from the year-ago reported figure.
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Foot Locker (FL) Stock Grapples With Several Headwinds
Foot Locker, Inc. (FL - Free Report) appears to be a weak performer for a while now due to several headwinds. A tough operating landscape, including inflationary pressures, foreign currency headwinds and other woes are weighing on the company’s performance. Consequently, the company posted dull first-quarter fiscal 2023 results and issued a bleak outlook for the current fiscal year.
Such limitations have caused this Zacks Rank #5 (Strong Sell) company’s shares to decline 31.2% in the year-to-date period, wider than the industry’s 3.2% fall.
Let’s Delve Deeper
Apart from the aforesaid headwinds, a slowdown in consumer spending and supply-chain woes have been weighing on the company’s performance. Markdowns to optimize inventory levels and an elevated promotional environment have been hurting the company’s margins. It has been witnessing higher selling, general and administrative (SG&A) expenses for a while now.
In first-quarter fiscal 2023, Foot Locker’s sales and earnings fell short of the Zacks Consensus Estimate, with both the metrics declining year over year. The company posted adjusted earnings of 70 cents per share, which missed the consensus estimate of adjusted earnings of 78 cents per share.
Image Source: Zacks Investment Research
FL registered total sales of $1,931 million, which came below the consensus estimate of $1,995 million. Excluding foreign currency fluctuation impacts, total sales declined 10%. Comparable-store sales (comps) also inched down 9.1% due to macroeconomic headwinds, including lower income tax refunds in the United States, the changing vendor mix and the repositioning of Champs Sports.
Consequently, management trimmed the outlook for fiscal 2023. For the current fiscal year, management expects sales to decline 6.5-8%, including 1% from the extra week and the comps to fall 7.5-9% year over year. The gross margin is anticipated in the range of 28.6-28.8% compared with the prior view of 30.8-31%. The SG&A rate is forecast at 22.4-22.6%.
Management stated that the EBIT margins will decline significantly in fiscal 2023. Further, the gross margin will decline by 310-330 basis points on higher markdown activity, incremental occupancy deleverage and an increase in theft-related shrink. Further, the company’s overall store count is likely to decline by 9% in 2023.
The company envisions fiscal 2023 adjusted earnings per share decreasing 57% to $2.00-$2.25, down from $4.95 recorded last fiscal year. For the fiscal second quarter also, management anticipates comparable sales to decline in the high-single digits, compared with its previous expectations of a mid-single digits decline.
Given the aforesaid negatives, we remain cautious about the stock in the near term. A Growth Score of D further adds to the weakness. The Zacks Consensus Estimate for fiscal 2023 sales and earnings per share (EPS) is currently pegged at $8.1 billion and $2.09, respectively. These represent corresponding year-over-year decreases of 7.3% and 57.8%.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Urban Outfitters (URBN - Free Report) and American Eagle Outfitters (AEO - Free Report) .
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 3.4% and 732%, respectively, from the year-ago reported figures. ANF delivered an average trailing four-quarter earnings surprise of 480.6%.
Urban Outfitters, a sporting goods retailer, currently sports a Zacks Rank of 1. The company has an average trailing four-quarter earnings surprise of 12.2%.
The consensus estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 5.1% and 57.1%, respectively, from the year-ago reported figures.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO delivered an average trailing four-quarter earnings surprise of 9.2%.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 4.1%, from the year-ago reported figure.