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 Past 3 Months Performance Dismal: Here's Why
Read MoreHide Full Article
Of late, Foot Locker, Inc. (FL - Free Report) has been struggling on the bourses, due to its soft view for the Christmas quarter. Shares of this New York-based company have increased 0.3% in the past three months, underperforming the industry’s growth of 7.8%.
Moreover, unimpressive estimate revision trend for the current quarter and fiscal 2019 buoy pessimism. Over the past 30 days, the Zacks Consensus Estimate has moved down by 3 cents and 4 cents to $1.62 and $4.90, respectively.
We note that the stock came under pressure in spite of this sporting-goods retailer reporting a positive earnings surprise in the third quarter of fiscal 2019. The company’s total sales fell short of the Zacks Consensus Estimate for the third quarter in a row. Also, management’s projection of flat comparable store sales and 10-30 basis points contraction in gross margin for the holiday-season quarter were not well perceived by investors.
Notably, concerns related to stiff competition from direct-to-consumer channels of other renowned footwear makers, tariff imposition due to the U.S.-China trade war and sluggish mall traffic cannot be ignored. SG&A costs have been rising for a while due to sustained investments in augmenting digital capabilities and higher incentive compensation cost. This may keep margins under pressure. For fiscal 2019, SG&A rate is projected to be up 40-50 basis points.
Revival Strategies
Foot Locker is trying to improve its performance through its operational and financial initiatives. The company is investing in digital platforms and improving supply chain efficiencies. International expansion, especially in Europe, is another growth catalyst. It is also focusing on augmenting direct-to-consumer operations, tapping underpenetrated markets and opening of Power Stores.
This Zacks Rank #3 (Hold) company entered into a partnership with Nike for a pop-up store called Sneakeasy NYC and made an investment of $15 million in Carbon38, which owns and operates an e-commerce destination for active and performance wear for women. The company also acquired a minority interest in Goat, a managed marketplace for authentic sneakers, by making an investment of $100 million.
Foot Locker invested $3 million in Super Heroic, a kid’s footwear brand and $12.5 million in “Rockets of Awesome”, a children's apparel company. It also made an investment of $3 million in NTWRK, a leading youth culture e-commerce and content platform. These investments are expected to widen the company’s scope to expand products and brands, access new business segments and take advantage of innovative technologies.
We believe that strategic endeavors along with planned investments may help the company attain long-term goal.
Shoe Carnival, Inc. (SCVL - Free Report) delivered positive earnings surprise of 11.5%, on average, in the trailing four quarters. It currently sports a Zacks Rank #1.
Tilly's, Inc. (TLYS - Free Report) has a long-term earnings growth rate of 11% and a Zacks Rank #1.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
Image: Bigstock
Foot Locker's Past 3 Months Performance Dismal: Here's Why
Of late, Foot Locker, Inc. (FL - Free Report) has been struggling on the bourses, due to its soft view for the Christmas quarter. Shares of this New York-based company have increased 0.3% in the past three months, underperforming the industry’s growth of 7.8%.
.jpg)
Moreover, unimpressive estimate revision trend for the current quarter and fiscal 2019 buoy pessimism. Over the past 30 days, the Zacks Consensus Estimate has moved down by 3 cents and 4 cents to $1.62 and $4.90, respectively.
We note that the stock came under pressure in spite of this sporting-goods retailer reporting a positive earnings surprise in the third quarter of fiscal 2019. The company’s total sales fell short of the Zacks Consensus Estimate for the third quarter in a row. Also, management’s projection of flat comparable store sales and 10-30 basis points contraction in gross margin for the holiday-season quarter were not well perceived by investors.
Notably, concerns related to stiff competition from direct-to-consumer channels of other renowned footwear makers, tariff imposition due to the U.S.-China trade war and sluggish mall traffic cannot be ignored. SG&A costs have been rising for a while due to sustained investments in augmenting digital capabilities and higher incentive compensation cost. This may keep margins under pressure. For fiscal 2019, SG&A rate is projected to be up 40-50 basis points.
Revival Strategies
Foot Locker is trying to improve its performance through its operational and financial initiatives. The company is investing in digital platforms and improving supply chain efficiencies. International expansion, especially in Europe, is another growth catalyst. It is also focusing on augmenting direct-to-consumer operations, tapping underpenetrated markets and opening of Power Stores.
This Zacks Rank #3 (Hold) company entered into a partnership with Nike for a pop-up store called Sneakeasy NYC and made an investment of $15 million in Carbon38, which owns and operates an e-commerce destination for active and performance wear for women. The company also acquired a minority interest in Goat, a managed marketplace for authentic sneakers, by making an investment of $100 million.
Foot Locker invested $3 million in Super Heroic, a kid’s footwear brand and $12.5 million in “Rockets of Awesome”, a children's apparel company. It also made an investment of $3 million in NTWRK, a leading youth culture e-commerce and content platform. These investments are expected to widen the company’s scope to expand products and brands, access new business segments and take advantage of innovative technologies.
We believe that strategic endeavors along with planned investments may help the company attain long-term goal.
3 Stocks to Consider
Boot Barn Holdings, Inc. (BOOT - Free Report) has a long-term earnings growth rate of 15% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shoe Carnival, Inc. (SCVL - Free Report) delivered positive earnings surprise of 11.5%, on average, in the trailing four quarters. It currently sports a Zacks Rank #1.
Tilly's, Inc. (TLYS - Free Report) has a long-term earnings growth rate of 11% and a Zacks Rank #1.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.6% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>