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Foot Locker: Argus Research Downgraded It to 'Hold'

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Part 2
Foot Locker: Argus Research Downgraded It to 'Hold' PART 2 OF 3

Foot Locker’s Weak Results Impacted Its Stock Price

Foot Locker’s 1Q17 results

Foot Locker (FL) reported its results for 1Q17 (ending April 29, 2017) on May 19, 2017.

It missed analysts’ revenue and earnings estimates. Foot Locker’s earnings per share fell 2.2% YoY (year-over-year) to $1.36—around $0.02 short of the consensus. Its total revenue stood at $2 billion and missed analysts’ expectations by $20 million.

The specialty athletic retailer’s weaker-than-expected performance was driven by lower demand for some of the key categories. Sales comps stood at 0.5%—compared to 1.4% consensus expectations. The company’s management blamed the delay on tax refunds and lack of choices in kid’s footwear for the missing expectations.

Foot Locker’s Weak Results Impacted Its Stock Price

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The gross margin fell by 100 basis points to 34% of sales, primarily due to higher promotional expenses and occupancy costs.

Weaker-than-expected results

Foot Locker stock was penalized for missing expectations. The share price fell 17% after the earnings release. Currently, the stock is trading at $55.10—44% below its 52-week high price. It has lost 22% of its value YTD (year-to-date), following its results on May 19.

However, most sportswear stocks are in the red this year. Specialty athletic retailers DSW (DSW) and Dick’s Sporting Goods (DKS) have fallen 23% and 23.6%, respectively. Sportswear brands Under Armour (UAA) and Lululemon Athletica (LULU) have fallen 21% and 19%, respectively. Nike (NKE), which is also Foot Locker’s largest vendor, has risen ~7% YTD.

Investors looking for exposure to Foot Locker could consider the iShares Edge MSCI Multifactor Consumer Discretionary ETF (CNDF), which invests 1.8% of its portfolio in the company.

In the next part, we’ll discuss Wall Street analysts’ view on Foot Locker.

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