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Foot Locker (FL) Sustains Earnings Surprise Momentum in Q3

Solid comparable-store sales growth and cost containment efforts helped Foot Locker, Inc.FL to continue with its positive earnings surprise streak for the ninth consecutive quarter. The company's third-quarter fiscal 2015 earnings of $1.00 per share surpassed the Zacks Consensus Estimate of 94 cents and surged 20% from the prior-year quarter figure of 83 cents. In the trailing four quarters (including the quarter under review), the stock outperformed the Zacks Consensus Estimate by an average of 11.2%. Shares were up 5.7% in the last trading session.

Foot Locker Inc. (FL) - Earnings Surprise | FindTheCompany

Despite an 8.7% jump in comparable-store sales, Foot Locker's total sales rose only 3.6% year over year to $1,794 million, as foreign currency headwinds hurt sales by approximately $90 million. Excluding the negative impact of foreign currency fluctuations, total sales increased 8.9%. The figure also came in ahead of the Zacks Consensus Estimate of $1,782 million. In the trailing four quarters, this Zacks Rank #3 (Hold) stock beat the Zacks Consensus Estimate by an average of 1.1%.

The company's impressive performance was backed by effective implementation of its operational and financial initiatives. Management believes that by continually exploiting opportunities like children's business, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments, Foot Locker is likely to benefit in the long run. International expansion, especially in Europe, is another growth catalyst. Europe, Canada and the Asia Pacific regions witnessed healthy performance. The company is also enhancing its E-commerce platform.

Gross margin expanded 60 basis points to 33.8% of sales, whereas the selling, general and administrative (SG&A) expense rate contracted 80 basis points to 19.6% during the quarter.

Management now projects a mid single-digit increase in comparable sales in the fourth quarter, possibly at the high end of that range. Foot Locker now anticipates an improvement of 30-40 basis points in both gross margin and SG&A expenses. Also, it expects to attain double-digit growth in earnings per share in the final quarter.

Store Update

During the quarter, Foot Locker opened 30 new outlets, remodeled or relocated 48 outlets, and shuttered 16 outlets. At the end of the third quarter, the company operated 3,432 outlets across 23 countries in North America, Australia, New Zealand and Europe. Apart from these, there are 48 franchised Foot Locker stores in South Korea and the Middle East. Germany has 16 franchised Runners Point stores.

Other Financial Details

Foot Locker ended the quarter with cash and cash equivalents of $878 million, long-term debt and obligations under capital leases of $130 million, and shareholders' equity of $2,547 million.

During the quarter, the company repurchased 1.56 million shares worth $110.6 million and also paid dividends of $35 million. The company incurred capital expenditure of $57 million.

Stocks to Consider

Some better-ranked stocks in the retail sector are NIKE, Inc. NKE , sporting a Zacks Rank #1 (Strong Buy), American Eagle Outfitters, Inc. AEO and Hanesbrands Inc. HBI , both carrying a Zacks Rank #2 (Buy).

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NIKE INC-B (NKE): Free Stock Analysis Report

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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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