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Why Has Foot Locker Stock Been a Sector Outperformer?

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Nov. 22 2019, Updated 5:42 a.m. ET

Analyzing shareholder returns for Foot Locker and sporting goods retailers

Foot Locker (FL) stock has been one of the strongest performers in the retail industry group. The company has generated total annualized returns of 20.5% over the past five years.[1. through June 17, 2016] Below are returns for some of Foot Locker’s peers:

That contrasts with returns for the SPDR S&P Retail ETF (XRT) and the Consumer Discretionary Select Sector SPDR ETF (XLY) of 11.1% and 17%, respectively.

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Stock price performance

Foot Locker’s stock price has risen 135% from June 17, 2011, to June 17, 2016. It has been a primary driver that has propelled shareholder returns. The company’s stock price outperformance has been fueled by same-store sales growth and a rising profitability record. The retailer has performed far better than the above-mentioned peers in terms of sales and earnings growth.

Another stock price driver has been the rising popularity of Foot Locker’s vendor brands, particularly Nike (NKE). As we saw in Part 11 of this series, Nike’s importance as a supplier to Foot Locker has steadily risen over the years. It currently accounts for more than 70% of Foot Locker’s purchases.

Nike’s returns over the period have been even better. The company has generated average returns of 22.4% over the last five years. That compares to 12.5% for the S&P 500 Index (SPY) (IVV) (VOO) and 10.7% for the Dow Jones Industrial Average (DIA).

Stock price performance in 2016

That being said, Foot Locker’s stock price has fallen 17.6% year-to-date in 2016. That contrasts with the fall of 0.3% for XLY and a rise of 1.3% for the S&P 500 Index.[1. through June 17, 2016] That’s partly since Foot Locker’s fiscal 1Q17 results proved slightly disappointing for the Markets. We’ll look at this in more detail in Part 20.

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