We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Foot Locker's (FL) Shares Decline on Q2 Earnings Miss
Read MoreHide Full Article
Shares of Foot Locker, Inc. (FL - Free Report) have tumbled 28.3% during the trading hours on Aug 23 on dismal second-quarter fiscal 2023 results. The top and the bottom lines fell year over year and missed the Zacks Consensus Estimate. Driven by a worse-than-expected consumer slowdown, which led to a sales decline, management lowered the outlook for fiscal 2023.
Over the past three months, shares of this Zacks Rank #4 (Sell) company have declined 35.6% against the industry’s rise of 11%.
Q2 Metrics
The athletic shoes and apparel retailer posted adjusted earnings of 4 cents per share, which missed the Zacks Consensus Estimate of earnings of 5 cents per share. The bottom line decreased from adjusted earnings per share of $1.10 in the prior-year quarter.
Total sales of $1,864 million missed the consensus estimate of $1,884 million. Also, the metric declined 9.9% from the year-ago reported period. Excluding the foreign-currency fluctuation impact, total sales fell 10.2%. Digital penetration was 15.5% in the reported quarter, up 50 basis points (bps) year over year, excluding East Bay, which was closed last year.
Foot Locker, Inc. Price, Consensus and EPS Surprise
Comparable-store sales (comps) fell 9.4% due to persistent consumer softness, changing vendor mix and repositioning of Champs Sports.
An Insight Into Margins
Foot Locker's gross margin rate in the reported quarter dropped 460 bps from the prior-year quarter’s figure. Higher promotional landscape including markdowns, occupancy deleverage and increased shrink caused a margin decline. We had expected a gross margin decline of 520 bps in the quarter.
The selling, general and administrative (SG&A) expenses increased 190 bps as a percentage of sales from the prior year due to underlying sales decline, inflation and investments in front-line wages and technology. However, this was partially offset by savings from the cost optimization program. We had anticipated SG&A expenses to expand 140 bps.
Image Source: Zacks Investment Research
Store Update
During the fiscal second quarter, Foot Locker opened 15 stores and remodeled or relocated 16 outlets while closing 108 stores.
As of Jul 29, 2023, Foot Locker operated 2,599 stores across 26 countries in North America, Europe, Asia, Australia and New Zealand. Also, FL had 184 franchised stores operating in the Middle East and Asia.
Other Financial Details
Foot Locker ended the fiscal second quarter with cash and cash equivalents of $180 million. Long-term debt and obligations under finance leases amounted to $444 million and shareholders’ equity summed at $3,247 million. As of Jul 29, 2023, merchandise inventories were $1,831 million, up 11.4% from the year-earlier quarter’s end level.
During the reported quarter, management paid a quarterly dividend of 40 cents per share, valuing $37 million. It did not repurchase shares in the quarter. We note that the company is pausing the quarterly cash dividends after its recently-approved payout on Oct 27 to holders of record as on Oct 13, in a bid to boost the balance sheet flexibility to drive long-term growth
Outlook
For fiscal 2023, management expects the sales to decline 8-9%, including 1% from the extra week, and the comps to fall 9-10% year over year. These are comparable with the earlier views of sales and comps declining by 6.5-8% and 7.5-9%, respectively. Licensing revenues are likely to be $17 million.
The gross margin is anticipated to decrease 390-410 bps in the range of 27.8-28% compared with the prior view of 28.6-28.8%. The company lowered the gross margin guidance on account of higher markdown activity, incremental occupancy deleverages and an increase in shrink. The SG&A rate is forecast to be 22.7-22.9%, up from the earlier view of 22.4-22.6%.
The company envisions fiscal 2023 adjusted earnings per share tobe $1.30-$1.50, down from $2.00-$2.25 predicted earlier. The earnings guidance incudes 15 cents a share from the extra week. Management predicts adjusted CapEx to be $290 million for fiscal 2023, versus the earlier estimate of $305 million.
Stocks to Consider
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Boot Barn (BOOT - Free Report) and American Eagle Outfitters (AEO - Free Report) .
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and earnings per share (EPS) suggests growth of 3.4% and 736%, respectively, from the year-ago reported figures. ANF has delivered an earnings surprise of 480.6% in the last four quarters.
Boot Barn, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 13.5%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales suggests growth of 5.1% from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank of 2. AEO has delivered an average earnings surprise of 9.2% in the last four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 7.2% from the year-ago reported figure.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Foot Locker's (FL) Shares Decline on Q2 Earnings Miss
Shares of Foot Locker, Inc. (FL - Free Report) have tumbled 28.3% during the trading hours on Aug 23 on dismal second-quarter fiscal 2023 results. The top and the bottom lines fell year over year and missed the Zacks Consensus Estimate. Driven by a worse-than-expected consumer slowdown, which led to a sales decline, management lowered the outlook for fiscal 2023.
Over the past three months, shares of this Zacks Rank #4 (Sell) company have declined 35.6% against the industry’s rise of 11%.
Q2 Metrics
The athletic shoes and apparel retailer posted adjusted earnings of 4 cents per share, which missed the Zacks Consensus Estimate of earnings of 5 cents per share. The bottom line decreased from adjusted earnings per share of $1.10 in the prior-year quarter.
Total sales of $1,864 million missed the consensus estimate of $1,884 million. Also, the metric declined 9.9% from the year-ago reported period. Excluding the foreign-currency fluctuation impact, total sales fell 10.2%. Digital penetration was 15.5% in the reported quarter, up 50 basis points (bps) year over year, excluding East Bay, which was closed last year.
Foot Locker, Inc. Price, Consensus and EPS Surprise
Foot Locker, Inc. price-consensus-eps-surprise-chart | Foot Locker, Inc. Quote
Comparable-store sales (comps) fell 9.4% due to persistent consumer softness, changing vendor mix and repositioning of Champs Sports.
An Insight Into Margins
Foot Locker's gross margin rate in the reported quarter dropped 460 bps from the prior-year quarter’s figure. Higher promotional landscape including markdowns, occupancy deleverage and increased shrink caused a margin decline. We had expected a gross margin decline of 520 bps in the quarter.
The selling, general and administrative (SG&A) expenses increased 190 bps as a percentage of sales from the prior year due to underlying sales decline, inflation and investments in front-line wages and technology. However, this was partially offset by savings from the cost optimization program. We had anticipated SG&A expenses to expand 140 bps.
Image Source: Zacks Investment Research
Store Update
During the fiscal second quarter, Foot Locker opened 15 stores and remodeled or relocated 16 outlets while closing 108 stores.
As of Jul 29, 2023, Foot Locker operated 2,599 stores across 26 countries in North America, Europe, Asia, Australia and New Zealand. Also, FL had 184 franchised stores operating in the Middle East and Asia.
Other Financial Details
Foot Locker ended the fiscal second quarter with cash and cash equivalents of $180 million. Long-term debt and obligations under finance leases amounted to $444 million and shareholders’ equity summed at $3,247 million. As of Jul 29, 2023, merchandise inventories were $1,831 million, up 11.4% from the year-earlier quarter’s end level.
During the reported quarter, management paid a quarterly dividend of 40 cents per share, valuing $37 million. It did not repurchase shares in the quarter. We note that the company is pausing the quarterly cash dividends after its recently-approved payout on Oct 27 to holders of record as on Oct 13, in a bid to boost the balance sheet flexibility to drive long-term growth
Outlook
For fiscal 2023, management expects the sales to decline 8-9%, including 1% from the extra week, and the comps to fall 9-10% year over year. These are comparable with the earlier views of sales and comps declining by 6.5-8% and 7.5-9%, respectively. Licensing revenues are likely to be $17 million.
The gross margin is anticipated to decrease 390-410 bps in the range of 27.8-28% compared with the prior view of 28.6-28.8%. The company lowered the gross margin guidance on account of higher markdown activity, incremental occupancy deleverages and an increase in shrink. The SG&A rate is forecast to be 22.7-22.9%, up from the earlier view of 22.4-22.6%.
The company envisions fiscal 2023 adjusted earnings per share tobe $1.30-$1.50, down from $2.00-$2.25 predicted earlier. The earnings guidance incudes 15 cents a share from the extra week. Management predicts adjusted CapEx to be $290 million for fiscal 2023, versus the earlier estimate of $305 million.
Stocks to Consider
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Boot Barn (BOOT - 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 earnings per share (EPS) suggests growth of 3.4% and 736%, respectively, from the year-ago reported figures. ANF has delivered an earnings surprise of 480.6% in the last four quarters.
Boot Barn, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 13.5%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales suggests growth of 5.1% from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank of 2. AEO has delivered an average earnings surprise of 9.2% in the last four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 7.2% from the year-ago reported figure.