Foot Locker (FL) Q3 Earnings & Sales Top Estimates, Stock Up

Shares of Foot Locker, Inc.FL advanced roughly 16% in the after-market trading session on Nov 20 following the company's better-than-expected third-quarter fiscal 2018 results. Although the top line declined marginally, the bottom line managed to score high on a year-over-year basis, courtesy of lower cost of sales and share repurchase activity.

The New York-based retailer continued with its positive earnings surprise streak for the fifth straight quarter. This has led the stock to advance 14% in a year compared with the industry 's growth of 1%. This operator of athletic shoes and apparel retailer reported quarterly earnings of 95 cents a share that beat the Zacks Consensus Estimate of 92 cents and climbed 9.2% from the year-ago period.

The company generated total sales of $1,860 million that fell 0.5% year over year but came ahead of the Zacks Consensus Estimate of $1,846 million, marking the third successive quarter of beat. Excluding the effect of foreign currency fluctuations, total sales rose 0.4%. The 53rd week shift hurt sales by about $60 million during the reported quarter.

Foot Locker, Inc. Price, Consensus and EPS Surprise

Foot Locker, Inc. Price, Consensus and EPS Surprise | Foot Locker, Inc. Quote

Meanwhile, comparable-store sales increased 2.9% during the quarter under review, faring much better than 0.5% growth witnessed in the preceding quarter. Comparable sales for footwear improved in low-single digit, while the same increased high-single digit in apparel. Comparable sales at accessories such as hats and socks were down double digits.

Gross margin expanded 60 basis points to 31.6% during the quarter, reflecting 80 basis points expansion in merchandise margin rate and 20 basis points deleverage in occupancy and buyers' compensation. SG&A expense rate increased 170 basis points to 21.4%.

Store Update

During the quarter under review, Foot Locker opened 10 new outlets, remodeled or relocated 13 outlets, and shuttered 20 outlets. As of Nov 3, 2018, the company operated 3,266 outlets across 26 countries in North America, Europe, Asia, Australia, and New Zealand. Apart from these, there are 108 franchised Foot Locker stores in the Middle East. Germany has 10 franchised Runners Point stores.

During fiscal 2018, the company plans to open approximately 45 stores, relocate or remodel 124 stores and close about 140 stores.

Other Financial Details

Foot Locker ended the quarter with cash and cash equivalents of $748 million, long-term debt of $124 million, and shareholders' equity of $2,451 million. During the quarter, the company repurchased 2.2 million shares of worth $108 million and paid a quarterly dividend of $39 million. The company incurred capital expenditures of $38 million during the quarter under review and is expects to spend $210 million in fiscal 2018.


Comparable sales during the fourth quarter are expected to be up low to mid-single digits. For fiscal 2018, management envisions the metric to be up in low single digit. Further, management anticipates double-digit increase in earnings per share for the fiscal year.

On a 13-week comparative basis, gross margin is likely to improve 100-130 basis points during the final quarter, while SG&A expenses are expected to increase as a percentage of sales by 100-120 basis points.

Wrapping Up

Foot Locker is certainly trying to improve performance through operational and financial initiatives. This Zacks Rank #2 (Buy) company is focusing on developing digital competencies and supply chain. The company's digital endeavors comprise improvement of mobile and web platforms, implementation of new point-of-sale software worldwide, and expansion of data analytics capabilities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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