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Foot Locker (FL) Stock Rallies on Q4 Earnings & Sales Beat

Zacks Equity Research
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Shares of Foot Locker, Inc. FL are up roughly 13% during the pre-market trading session on Mar 1, following the company’s better-than-expected performance in fourth-quarter fiscal 2018. Both the top and the bottom line increased year over year. Management also hinted at mid-single digit comparable sales growth and double-digit increase in earnings per share during fiscal 2019. Surely, these are well perceived by investors.

Moving on, this was the sixth straight quarter of a positive earnings surprise for this New York-based retailer. The stock’s bullish run on the bourses is a clear indication of the same. We note that this Zacks Rank #2 (Buy) company, belonging to the Retail - Apparel And Shoes industry, has gained 23% in the past six months as compared with the S&P 500’s decline of around 4%.

This operator of athletic shoes and apparel retailer reported quarterly earnings of $1.56 per share that beat the Zacks Consensus Estimate of $1.37 and climbed 23.8% from the year-ago quarter, courtesy of higher net sales and share repurchase activity.

The company generated total sales of $2,272 million that grew 2.8% year over year and also beat the Zacks Consensus Estimate of $2,166 million, marking the fourth successive quarter of a beat. Excluding the effect of foreign currency fluctuations, total sales rose 4.2%. Meanwhile, comparable-store sales increased 9.7% during the quarter under review.

Store Update

In the fourth quarter, Foot Locker opened 11 new outlets, remodeled or relocated 33 stores, and shuttered 56. As of Feb 2, 2019, the company operated 3,221 outlets across 27 countries in North America, Europe, Asia, Australia and New Zealand. Apart from these, there are 112 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 $891 million, long-term debt of $124 million, and shareholders’ equity of $2,506 million. Further, management invested $187 million in its fleet of stores, digital platforms, logistics capabilities and other infrastructure. The company had earlier revealed a capital expenditure program of $275 million for fiscal 2019.

During the quarter, the company repurchased 1.2 million shares of worth $62 million. In fiscal 2018, the company bought back 7.89 million shares for $375 million. The company has returned $533 million to stockholders via share repurchases and dividends.

Recently, the company raised its quarterly dividend by 10% to 38 cents. This marks the company’s ninth successive quarter of dividend hike. Moreover, the company’s board announced a new three-year share buyback program worth $1.2 billion.

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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