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Foot Locker (FL) Posts Positive Earnings Surprise in Q4

Zacks Equity Research

Foot Locker, Inc. FL posted positive earnings surprise for the third straight quarter, as it reported fourth-quarter fiscal 2016 results. After outperforming the Zacks Consensus Estimate by 3.3% and 1.8% in the second and third quarters, respectively, this operator of athletic shoes and apparel retailer again surpassed the estimate by 4.6%. We noted that in the trailing four quarters (including the quarter under review) the company beat the Zacks Consensus Estimate by an average of 2.2%.

The company delivered quarterly earnings of $1.37 per share that outpaced the Zacks Consensus Estimate of $1.31 and jumped 18.1% year over year. Including one-time items, earnings came in at $1.42, up significantly from $1.14 delivered in the year-ago period.

Shares of this Zacks Rank #3 (Hold) company are up 3% during pre-market trading hours. We noted that Foot Locker has outperformed the Zacks categorized industry in the past six months. The stock has jumped 2.5%, whereas the Zacks categorized Retail-Apparel/Shoe industry has declined 13.8%.

On the other hand, total sales of $2,113 million were up 5.3% year over year and came in line with the Zacks Consensus Estimate. Excluding the impact of foreign currency fluctuations, total sales increased 6.1%. Comparable-store sales rose 5% during the quarter.

The year-over-year growth in both the top and bottom-line was backed by effective implementation of the company’s operational and financial initiatives. Management believes that by continually capitalizing on opportunities like children’s business, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments, Foot Locker is likely to benefit in the long run. International expansion, especially in Europe, is another growth catalyst. Further, the company is enhancing its eCommerce platform.

Gross margin expanded 10 basis points to 33.7% of sales. The selling, general and administrative expense (SG&A) rate contracted 60 basis points to 18.7% during the quarter.

Despite sluggish sales environment, management projects mid-single digit increase in comparable sales and anticipates double-digit growth in earnings per share in fiscal 2017.

Store Update

During the quarter under review, Foot Locker opened 20 new outlets, remodeled or relocated 59 outlets and shuttered 51 outlets. As of Jan 28, 2017, the company operated 3,363 outlets across 23 countries in North America, Australia, New Zealand and Europe. Apart from these, there are 59 franchised Foot Locker stores in South Korea and the Middle East. Germany has 15 franchised Runners Point stores.

Foot Locker, Inc. Price, Consensus and EPS Surprise


Foot Locker, Inc. Price, Consensus and EPS Surprise | Foot Locker, Inc. Quote

Other Financial Details

Foot Locker ended the quarter with cash and cash equivalents of $1,046 million, long-term debt and obligations under capital leases of $127 million, and shareholders’ equity of $2,710 million.

During the quarter, the company repurchased 1.1 million shares worth $80 million and paid a quarterly dividend of 27.5 cents a share.

The company recently raised its quarterly dividend by approximately 13% to 31 cents (or $1.24 annually) from 27.5 cents a share (or $1.10 annually). The board also approved a fresh share buyback program for three years, under which the company can repurchase shares worth $1.2 billion, replacing the earlier program of $1 billion.

In fiscal 2016, management incurred capital expenditures of approximately $284 million. For fiscal 2017, the board of directors has sanctioned $277 million capital expenditure program. Foot Locker stated that it will keep on spending capital to enhance its footprint in major cities globally, remodeling existing store fleet, building robust capabilities in direct-to-customer unit and upgrading technology as well as supply chain infrastructure.

Stocks to Consider

Investors may consider better-ranked stocks such as Burlington Stores, Inc. BURL flaunting a Zacks Rank #1 (Strong Buy), and Kate Spade & Company KATE and The Children's Place, Inc. PLCE carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.

Kate Spade delivered an average positive earnings surprise of 14.6% in the trailing four quarters and has a long-term earnings growth rate of 28.3%.

Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.

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Foot Locker, Inc. (FL): Free Stock Analysis Report
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