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Can Foot Locker Maintain Its Momentum?

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Stock rose 8.1%

As of August 17, Foot Locker (FL) stock rose 8.1% to $50.70 on a YTD (year-to-date) basis. Foot Locker stock is expected to maintain the momentum after its second-quarter results due to the upbeat forecast. The company is scheduled to release its second-quarter results on August 24.

For the second fiscal quarter, analysts expect the company’s net sales to grow 3.3% to $1.76 billion, while the adjusted EPS is expected to increase 12.9% to $0.70.

Foot Locker will likely benefit from higher sales of premium products. The company is also revamping its loyalty program. The new loyalty program is expected to launch in the United States later in 2018.

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Foot Locker launched a new digital platform, which will enable the company to roll out updates across banner platforms simultaneously. Foot Locker converted several websites to the new platform. The company is working to convert all of its websites to the new digital platform. Foot Locker also launched a mobile app for Kids’ Foot Locker. The company is working on refreshing and re-launching apps for other banners.

Weakness in the footwear category is still a concern. In the first quarter, the footwear category’s comps declined in the low single digits. Men’s footwear comps and the kids’ category fell in the low single digits, while the women’s footwear category declined in the double digits. Nevertheless, the company is upbeat about innovative products like the Epic React, Explorer Endura, Air Max 270, and VaporMax 2.0.

Nike (NKE) and Adidas are expanding their direct-to-customer channel, which doesn’t bode well for Foot Locker.

Peers’ YTD stock movement

On a YTD basis, Deckers Outdoor (DECK) has risen 49.0% to $119.54. The company has been streamlining its store footprint, focusing on its summer and spring collection for the UGG brand, and optimizing its supply chain to control costs.

Skechers (SKX) has fallen 20.7% to $30.00 on a YTD basis. The company’s disappointing second-quarter results and lower third-quarter guidance have unnerved investors.

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