Foot Locker Posts Strong Results
New York-based specialty athletic retailer Foot Locker (NYSE: FL – $68.35) reported financial results for its second quarter ended July 30th with net income of $127 million, or $0.94 per share, compared with $0.84 per share last year and four cents higher than consensus. Second quarter comparable-store sales increased 4.7% and total sales increased 5.0%, to $1.78 billion this year, compared with sales of $1.695 billion for the corresponding prior-year period and a bit higher than Street expectations of $1.75 billion. Excluding the effect of foreign currency fluctuations, total sales for the second quarter increased 5.4%. The Company’s gross margin rate improved to 33% of sales from 32.6% a year ago. During the second quarter, the Company opened 23 new stores, remodeled or relocated 64 stores and closed 18 stores. As of July 30, 2016, the Company operated 3,401 stores in 23 countries in North America, Europe, Australia and New Zealand. In addition, 54 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 15 franchised Runners Point stores in Germany.
The issue currently trades at a forward price earnings ratio of about 14, much lower than historic norms, based on full-year estimates of $4.76 per share. And though weakness in basketball products recently shook investor confidence, I continue to like the resiliency displayed by the company’s diversified portfolio. The shares moved higher in early trading by nearly 11%, recovering some of the decline since February. The shares can remain a holding in aggressive accounts willing to tolerate the volatile retail clothing market.