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Foot Locker Stock Up over 14% on Strong First-Quarter Results

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Better-than-expected numbers

Today, Foot Locker (FL) was trading 14.4% higher at 7:16 AM EST after announcing results for the first quarter. The company’s sales of $2.03 billion beat analysts’ projection of $1.96 billion while adjusted EPS of $1.45 came in way better than the consensus estimate of $1.25. Increasing sales of premium products led to the strong quarterly performance.

On a year-over-year basis, sales were up 1.2%. However, sales excluding the impact of foreign exchange movement declined 1.5%.

Also, comparable-store sales were down 2.8%. CEO Richard Johnson stated that the company is positioned to witness inflection in comps growth as the year progresses, given the strong vendor partnerships as well as the brand’s positioning among the youth market.

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Quarter in detail

Gross margin for the second quarter declined by 110 basis points to 32.9%. Selling, general, and administrative expenses were up 3.8% while the corresponding expense rate increased by 50 basis points to 19%. This increase was mainly due to ongoing investments to enhance the company’s digital capabilities. Foot Locker has implemented quite a few initiatives—such as overhauling its merchandise, cutting its costs, and improving its digital presence—to retain market share amid increased competition.

Due to higher selling, general, and administrative expenses and litigation charges, the company’s operating income fell 16.4% to $224 million. Its operating margin was 11.1%, down 230 basis points from the first quarter last year. Driven by prudent management, inventory was down 5.4% to $1.21 billion.

As of May 5, Foot Locker operated 3,284 stores across North America, Europe, Australia, and New Zealand. The company opened 11 stores and shut down 37 stores in the first quarter. It also remodeled or relocated 43 locations.

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