Back to top

Foot Locker's (FL) Q3 Earnings Likely to Improve: Here's Why

Read MoreHide Full Article

Foot Locker, Inc. (FL - Free Report) is scheduled to release third-quarter fiscal 2018 results on Nov 20. Well the obvious question that comes to mind is whether this retailer of athletic shoes and apparel will be able to deliver a positive earnings surprise in the quarter to be reported. In the trailing four quarters, the company has outperformed the Zacks Consensus Estimate by an average of 8.2%.

The Zacks Consensus Estimate for the quarter under review has remained stable in the past 30 days and is pegged at 92 cents. This reflects an increase of roughly 6% from the year ago period. Let’s analyze the factors influencing the company’s performance.

Factors at Play

Foot Locker is trying to improve performance through operational and financial initiatives. The company is focusing on development of supply chain, improvement of mobile and web platforms, and expansion of data analytics capabilities. The company is also focusing on augmenting direct-to-consumer operations, margin expansion, tapping underpenetrated markets and testing new retail concept, Power Stores.

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 formats opportunities and executing shop-in-shop spaces in collaboration with vendors.

However, higher SG&A expenses and soft European business are concerns. Foot Locker had earlier forecast SG&A expense is likely to increase as a percentage of sales by 140-160 basis points during the third quarter.

The Zacks Consensus Estimate of revenues for the third quarter is pegged at $1,846 million, down about 1% year over year. This follows an increase of 4.8% witnessed in the preceding quarter. Management had earlier guided that comparable-store sales (comps) during the third quarter are likely to be to be up in low-single digits. Comps at stores declined 0.8%, while the metric improved 9.3% at direct-to-customer channel in the second quarter.

Foot Locker, Inc. Price, Consensus and EPS Surprise


Foot Locker, Inc. Price, Consensus and EPS Surprise | Foot Locker, Inc. Quote

What the Zacks Model Unveils?

Our proven model shows that Foot Locker is likely to beat estimates this quarter. A stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Foot Locker has a Zacks Rank #2 and an Earnings ESP of -2.53%. This makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Burlington Stores (BURL - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Target (TGT - Free Report) has an Earnings ESP of +1.41% and a Zacks Rank #2.

Costco (COST - Free Report) has an Earnings ESP of +3.09% and a Zacks Rank #3.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

More from Zacks Analyst Blog

You May Like

Published in