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Foot Locker (FL) Q4 Earnings Beat Estimates, Comps Decline

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Foot Locker, Inc. FL came up with fourth-quarter fiscal 2019 results, which display the second straight quarter of an earnings beat but the fourth consecutive revenue miss. While the bottom-line increased year over year, top line came below the prior-year reported number. Also, comparable-store sales declined, following an increase in the preceding quarter.

Management highlighted that the company witnessed weaker-than-expected demand during the festive season. Consequently, the actions undertaken to manage slower moving items hurt gross margin rate during the quarter under review. Nonetheless, efficient cost management did provide cushion to the bottom line.

This operator of athletic shoes and apparel retailer posted adjusted earnings of $1.63 per share that came ahead of the Zacks Consensus Estimate of $1.58. The quarterly earnings increased 4.5% from the prior-year period reported figure of $1.56. This can be attributed to lower cost of sales and SG&A expenses as well as share repurchase activity.

Total sales of $2,221 million declined 2.2% year over year and also fell short of the consensus estimate of $2,236.9 million. Excluding the effect of foreign currency fluctuations, total sales decreased 2%. Comparable-store sales slid 1.6% during the quarter under review. This compares unfavorably with an increase of 5.7% in the preceding quarter and 9.7% in the year-ago period.

Foot Locker, Inc. Price, Consensus and EPS Surprise

 

Foot Locker, Inc. Price, Consensus and EPS Surprise

Foot Locker, Inc. price-consensus-eps-surprise-chart | Foot Locker, Inc. Quote

Management envisions comparable sales to be up low-single digits and earnings per share to increase in the low-to-mid single digit range during fiscal 2020.

Foot Locker's gross margin rate contracted 90 basis points to 31.5% during the quarter. We note that SG&A expense rate declined 50 basis points to 19.4%. Management had earlier projected gross margin contraction of 10-30 basis points and SG&A rate to be flat to up 10 basis points for the fourth quarter.

Shares of this Zacks Rank #3 (Hold) company have fallen 16.2% compared with the industry’s decline of 11.6% in the past three months.

Store Update

During the quarter, Foot Locker opened 32 new outlets, remodeled or relocated 66 stores, and shuttered 63. As of Feb 1, 2020, the company operated 3,129 outlets across 27 countries in North America, Europe, Asia, Australia and New Zealand. Apart from these, there are 130 franchised Foot Locker stores in the Middle East. Germany has nine franchised Runners Point stores.

Other Financial Details

Foot Locker ended the quarter with cash and cash equivalents of $907 million, long-term debt of $122 million, and shareholders’ equity of $2,480 million. During the quarter, the company repurchased 881,423 shares for $35 million.

Management incurred capital expenditure of $187 million in its store fleet, digital platforms, supply chain and logistics capabilities, and other infrastructure during fiscal 2019.

The company’s board of directors approved a $275 million capital expenditure plan for fiscal 2020, targeting to deliver organic growth across its business. Planned investment for next fiscal signifies higher spending toward community-based power stores in markets worldwide, apart from investments to enhance core stores. Through this spending, the company will continue focusing on digital advancement and enhancement of its U.S. supply chain.

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