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Foot Locker Sales and Earnings Fall Short

  Shares of shoe and apparel retailer Foot Locker, Inc. (NYSE: FL – $70.45) are trading lower after the company reported net income of $180 million, or $1.36 a share, in the first quarter, down from $191 million, or $1.39 a share, in the year-earlier period. The Street was expecting closer to $1.38. Sales rose 0.7% to $2.00 billion, but also shy of expectations of $2.02 billion. Same-store sales rose only 0.5%. Although the first quarter was one of the most profitable quarters ever, it fell well short of the company’s original expectations. Stronger sales in March and April were not enough to offset the slow start experienced in February. Foot Locker’s gross margins decreased to 34% of sales from 35%.

        During the first quarter, the company opened 30 new stores, remodeled or relocated 61 stores and closed 39 stores. As of the end of the quarter, Foot Locker operated 3,354 stores in 23 countries in North America, Europe, Australia and New Zealand. In addition, 62 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 15 franchised Runners Point stores in Germany. Like many brick and mortar retail companies, FL is facing stiff competition from online shopping, but I believe to a lesser degree than other soft-line stores. Most buyers of athletic footwear like to try on shoes before purchasing. Nonetheless, the stock will be one to watch in the quarter ahead.

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