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Foot Locker (FL) Loses Shine From Investors' Books: Here's Why
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Foot Locker, Inc. (FL - Free Report) appears to be a weak performer for a while now due to persistent headwinds. A tough operating landscape, including the inflationary pressures, foreign currency headwinds and other woes, is weighing on the company’s performance.
Due to such limitations, shares of this Zacks Rank #5 (Strong Sell) company have lost 44.3 in the year-to-date period compared with the industry’s 2.1% drop.
Let’s Delve Deeper
In addition to 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 elevated promotional environment have been weighing on its margins too. It has been witnessing higher selling, general and administrative (SG&A) expenses for a while now.
This is evident from the company’s dismal second-quarter fiscal 2023 results, wherein its sales and earnings fell short of the Zacks Consensus Estimate and declined year over year. The company posted adjusted earnings of 4 cents per share, which missed the consensus estimate by a penny. FL registered total sales of $1,864 million, which came below the consensus estimate of $1,884 million. Excluding the foreign currency fluctuation impacts, total sales declined 10.2%. Comparable-store sales (comps) also fell 9.4% due to persistent consumer softness, changing vendor mix and the repositioning of Champs Sports.
Consequently, management has provided a dull outlook for fiscal 2023. The company continues to operate in an extremely dynamic retail landscape and has witnessed softer-than-expected sales in the first half of the current fiscal year. Management had trimmed sales and margin outlook for the fiscal year.
For fiscal 2023, management expects 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 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 basis points 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 to be $1.30-$1.50, down from $2.00-$2.25 predicted earlier. The earnings guidance incudes 15 cents a share from the extra week.
Although Foot Locker has been taking initiatives to maneuver the aforesaid challenges, we remain cautious about the stock in the near term. A VGM Score of F further adds to the weakness.
Analysts look pessimistic about the stock. The Zacks Consensus Estimate for the company’s fiscal 2023 sales and earnings per share (EPS) is currently pegged at $7.96 billion and $1.34, indicating declines of 9% and 72.9%, respectively, year over year.
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 suggests growth of 10% from the year-ago reported figure. ANF delivered a trailing four-quarter earnings surprise of 724.8%, on average.
Urban Outfitters, the lifestyle apparel and accessories retailer, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 19.2%, on average.
The consensus estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 6.6% and 83.4%, respectively, from the year-ago reported figures.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently sports a Zacks Rank of 1. AEO delivered an average earnings surprise of 43.2% in the trailing four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 33% from the year-ago reported figure.
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Foot Locker (FL) Loses Shine From Investors' Books: Here's Why
Foot Locker, Inc. (FL - Free Report) appears to be a weak performer for a while now due to persistent headwinds. A tough operating landscape, including the inflationary pressures, foreign currency headwinds and other woes, is weighing on the company’s performance.
Due to such limitations, shares of this Zacks Rank #5 (Strong Sell) company have lost 44.3 in the year-to-date period compared with the industry’s 2.1% drop.
Let’s Delve Deeper
In addition to 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 elevated promotional environment have been weighing on its margins too. It has been witnessing higher selling, general and administrative (SG&A) expenses for a while now.
This is evident from the company’s dismal second-quarter fiscal 2023 results, wherein its sales and earnings fell short of the Zacks Consensus Estimate and declined year over year. The company posted adjusted earnings of 4 cents per share, which missed the consensus estimate by a penny. FL registered total sales of $1,864 million, which came below the consensus estimate of $1,884 million. Excluding the foreign currency fluctuation impacts, total sales declined 10.2%. Comparable-store sales (comps) also fell 9.4% due to persistent consumer softness, changing vendor mix and the repositioning of Champs Sports.
Foot Locker, Inc. Price and Consensus
Foot Locker, Inc. price-consensus-chart | Foot Locker, Inc. Quote
Consequently, management has provided a dull outlook for fiscal 2023. The company continues to operate in an extremely dynamic retail landscape and has witnessed softer-than-expected sales in the first half of the current fiscal year. Management had trimmed sales and margin outlook for the fiscal year.
For fiscal 2023, management expects 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 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 basis points 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 to be $1.30-$1.50, down from $2.00-$2.25 predicted earlier. The earnings guidance incudes 15 cents a share from the extra week.
Although Foot Locker has been taking initiatives to maneuver the aforesaid challenges, we remain cautious about the stock in the near term. A VGM Score of F further adds to the weakness.
Analysts look pessimistic about the stock. The Zacks Consensus Estimate for the company’s fiscal 2023 sales and earnings per share (EPS) is currently pegged at $7.96 billion and $1.34, indicating declines of 9% and 72.9%, respectively, year over year.
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 suggests growth of 10% from the year-ago reported figure. ANF delivered a trailing four-quarter earnings surprise of 724.8%, on average.
Urban Outfitters, the lifestyle apparel and accessories retailer, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 19.2%, on average.
The consensus estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 6.6% and 83.4%, respectively, from the year-ago reported figures.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently sports a Zacks Rank of 1. AEO delivered an average earnings surprise of 43.2% in the trailing four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 33% from the year-ago reported figure.