Back to top

Foot Locker's Initiatives on Track, Stock Up 47% in a Year

Read MoreHide Full Article

Foot Locker, Inc. (FL - Free Report) is gaining momentum on the back of its focuses on development of supply chain, improvement of mobile and web platforms, implementation of new point-of-sale software, and expansion of data analytics capabilities. The company also plans to spend a major portion of the capital on its fleet of stores, including revamping and remodeling of the same. Further, it is exploring off-mall retail format opportunities and executing shop-in-shop spaces in collaboration with vendors. Apart from helping the company to outpace the industry in a year’s time, these efforts should aid the company to attain long-term goals.

In a year’s time, this Zacks Rank #3 (Hold) stock has rallied 46.7%, outperforming its industry’s and S&P 500 index’s growth of 28.2% and 15.9%, respectively. In fact, the aforementioned growth drivers also helped the company continue with its positive earnings surprise streak for the fourth straight quarter in second-quarter fiscal 2018, wherein both the top and bottom lines beat expectations and improved year over year. Markedly, the stock has gained 5.5% since the announcement of the results. (Read: Foot Locker Q2 Earnings & Sales Beat Estimates, Up Y/Y)


 

Foot Locker boasts a strong portfolio of leading brands under a variety of store banners that helps it to target specific markets and meet consumer demand efficiently. Also, the company is effectively managing inventory, investing in digital platforms, improving supply chain efficiencies along with reorganizing corporate and division staff. Furthermore, Foot Locker entered into a partnership with Nike for a pop-up store called Sneakeasy NYC and made a strategic investment of $15 million in Carbon38. 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%.

The company’s efforts to improve its performance through its operational and financial initiatives are also commendable. These efforts include exploiting opportunities such as kids’ and women’s business, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments likely to benefit the company in the long run. Foot Locker is focusing on augmenting its e-commerce platform, growing direct-to-consumer operations, margin expansion, tapping underpenetrated markets and testing new retail concept, Power Stores as well.

However, the company is facing higher SG&A expenses rate, which may strain margins to an extent. In fact, Foot Locker’s international division also continues to operate in a challenging environment. During the second quarter, Foot Locker Europe and Foot Locker Asia Pacific witnessed a low single-digit decline in comparable sales.

Nonetheless, the company expects comparable-store sales during the third quarter to be up in low single digits. For fiscal 2018, management envisions the metric to be up in low single-digit against 3.1% decline registered last year.

3 Stocks to Watch
 
Zumiez (ZUMZ - Free Report) delivered an average positive earnings surprise of 9.6% in the trailing four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings (BOOT - Free Report) pulled off an average positive earnings surprise of 31.8% in the trailing four quarters. It has a long-term earnings growth rate of 23% and a Zacks Rank #1.

Urban Outfitters (URBN - Free Report) came up with an average positive earnings surprise of 17.7% in the trailing four quarters. It has a long-term earnings growth rate of 12.8% and a Zacks Rank of 1.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X 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>>



More from Zacks Analyst Blog

You May Like

Published in