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Factors Likely to Decide Foot Locker's (FL) Fate in Q4 Earnings

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Foot Locker, Inc. FL is scheduled to release fourth-quarter fiscal 2019 results on Feb 28. In the last reported quarter, the athletic shoes and apparel retailer recorded a positive earnings surprise of 5.6%. Also, in the trailing four quarters, the company’s bottom line outperformed the Zacks Consensus Estimate by 3.2%, on average.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.60, indicating 2.6% growth from the prior-year quarter’s reported figure. We note that the consensus mark has gone down by a penny in the past 7 days. Further, the consensus mark for revenues is pegged at $2.26 billion, indicating a marginal decline of 0.6% from the year-ago quarter.

Foot Locker, Inc. Price and EPS Surprise


Key Factors to Note

On the last earnings call, Foot Locker had projected relatively flat comparable-store sales (comps) for the fourth quarter, indicating soft trends in its apparel business and the challenging comparison to year-ago quarter’s 9.7% increase. Moreover, management guided contraction of 10-30 basis points in gross margin. 

Further, the company anticipates SG&A rate of flat to up 10 basis points for the quarter under review. In fact, it has been witnessing higher SG&A costs for a while. These expenses are expected to have put pressure on margins. Futher, stiff competition from direct-to-consumer channels of other renowned footwear makers and sluggish mall traffic are likely to have been deterrents. Also, the impact of adverse currency fluctuations is expected to get relected in the upcoming results.

Nonetheless, Foot Locker has been trying to improve performance through operational and financial initiatives. The company expects mid to high single-digit growth in earnings per share for the fourth quarter. 

It has been focusing on supply-chain development, improvement of mobile and web platforms, and expansion of data analytics capabilities. International expansion has been another growth catalyst. It has been also striving to augment direct-to-consumer operations, tap underpenetrated markets and open Power Stores.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Foot Locker this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Foot Locker has a Zacks Rank #3, its Earnings ESP of -2.04% makes surprise prediction difficult.

Stocks With Favorable Combination

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

Costco Wholesale Corporation COST presently has an Earnings ESP of +0.20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores (BURL - Free Report) currently has an Earnings ESP of +0.02% and a Zacks Rank #2.

Casey’s General Stores CASY currently has an Earnings ESP of +3.45% and a Zacks Rank #3.

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