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Foot Locker (FL) Misses Q1 Earnings Estimates, Trims View

Zacks Equity Research

Shares of Foot Locker, Inc. FL are down roughly 9% in the pre-market trading session on May 24. The stock has been hurt by the company’s lower-than-expected first-quarter results and trimmed fiscal 2019 earnings view. Management now anticipates high-single digit increase in earnings per share for the fiscal year, down from the earlier projection of double-digit growth. Surely, these have not been well perceived by investors.

We note that this Zacks Rank #3 (Hold) stock has declined roughly 12% during the past three months, while the industry has slid 14%.

This operator of athletic shoes and apparel retailer reported adjusted earnings of $1.53 per share that missed the Zacks Consensus Estimate of $1.61. However, the bottom line climbed 5.5% from the year-ago quarter, courtesy of higher net sales and share repurchase activity.

The company generated total sales of $2,078 million that grew 2.6% year over year but fell short of the Zacks Consensus Estimate of $2,107 million, after four successive quarter of beat. Excluding the effect of foreign currency fluctuations, total sales rose 4.7%. Meanwhile, comparable-store sales increased 4.6% during the quarter under review. Management had earlier forecast mid-single digit comparable sales growth for fiscal 2019.

Foot Locker's gross margin rate expanded 30 basis points to 33.2% during the quarter under review. We note that SG&A expense rate deleveraged 100 basis points to 20% due to strategic investments in digital capabilities and infrastructure. Management had earlier projected gross margin to expand in the band of 20-40 basis points and SG&A expenses rate to increase by 40-60 basis points during fiscal 2019.

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

Store Update

During the quarter, Foot Locker opened 14 new outlets, remodeled or relocated 13 stores, and shuttered 34. As of May 4, 2019, the company operated 3,201 outlets across 27 countries in North America, Europe, Asia, Australia and New Zealand. Apart from these, there are 119 franchised Foot Locker stores in the Middle East. Germany has 10 franchised Runners Point stores.

Other Financial Details

Foot Locker ended the quarter with cash and cash equivalents of $1,126 million, long-term debt of $123 million, and shareholders’ equity of $2,607 million. During the quarter, the company repurchased 32,100 shares of worth $1.8 million.

Wrapping Up

Foot Locker is certainly trying to improve performance through operational and financial initiatives. The company is focusing on developing digital competencies and supply chain. The company’s digital endeavors include improvement of mobile and web platforms, implementation of new point-of-sale software worldwide, and expansion of data analytics capabilities.

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