Foot Locker Posts Q1 Earnings In Line With Estimates; Revenue Slightly Shy
Athletic shoe and sportswear retailer Foot Locker, Inc. (NYSE: FL – $54.85) reported fiscal first-quarter earnings that rose to $191 million, or $1.39 a share from $184 million, or $1.29 a share, in the same period a year ago, matching the consensus. Sales, however, increased to $1.99 billion from $1.92 billion, just shy of Street estimates of $2.00 billion, with same-store sales growth of 2.9% missing expectations of a 4.5% increase. The gross margin rate was flat at 35% of sales, while merchandise inventories increased 2.1% to $1.26 billion. Foot Locker said it expects full-year same-store sales growth in the mid-single digit percentage range, which is mostly in line with consensus of 4.9%.
Foot Locker is increasingly executing its medium-term strategic plan, with key growth drivers around its kids and women’s businesses; aggressive expansion in Europe (after the Runners Point acquisition); further penetration of its (non-core) apparel offerings; and even some traction with its digital business. The shares are trading at a fifty-two week low, as retailers in general have been on the hot seat. Despite the lackluster performance in the shares, FL is still 15% higher than when it entered into the aggressive list in May of 2014.Therefore, with the shares moving in sympathy with other retailers, I believe an opportunity has been created for investors with a long-term outlook to take another look. The company’s ability to market a compelling product mix and its strength across all concepts and categories should help it offer risk oriented accounts above average growth.