Foot Locker's (FL) Q2 Earnings Beat Estimates, Increase Y/Y

Foot Locker, Inc. FL came up with stellar second-quarter fiscal 2020 results, wherein the top and the bottom lines outpaced the Zacks Consensus Estimate and grew year over year. Results benefited from the company’s sturdy efforts along with the digital business. Management also highlighted the huge response to the company’s assortment as stores started reopening. Furthermore, the company’s board reinstated the quarterly dividend program on robust liquidity and more stable cash outlook.

However, management did not update fiscal 2020 guidance on evolving pandemic-related uncertainties and its potential impact on the back-to-school season, team-sports participation and other government-stimulus packages. Foot Locker had withdrawn its fiscal 2020 guidance in March. Nevertheless, the company believes that it is well poised to maneuver amid the coronavirus pandemic.

Notably, shares of this New York-based retailer jumped 5.9% in the pre-market session, following the robust quarterly results. Over the past three months, the stock has gained 1.3% compared with the industry’s 30.1% rally.

Q2 Details

The athletic-shoes and apparel retailer posted adjusted earnings of 71 cents per share and outshone the Zacks Consensus Estimate of 69 cents. The bottom line also rose 7.6% year over year.

On a GAAP basis, the company reported earnings of 43 cents a share compared with 55 cents recorded in the prior-year period.

Total sales of $2,077 million grew 17.1% year over year and slightly came above the consensus estimate of $2,074 million. Excluding the effect of foreign-currency fluctuations, total sales rose 17.3%. Moreover, comparable-store sales jumped 18.6% during the quarter, against a decline of 42.8% witnessed in the previous quarter.

Foot Locker, Inc. Price, Consensus and EPS Surprise

Foot Locker, Inc. Price, Consensus and EPS Surprise

Foot Locker, Inc. price-consensus-eps-surprise-chart | Foot Locker, Inc. Quote

Foot Locker's gross-margin rate contracted 420 basis points (bps) to 25.9% during the quarter. However, SG&A expense rate fell 360 bps to 18.6%.

Store Update

During the reported quarter, Foot Locker opened 18 outlets, remodeled or relocated 26 stores, and shuttered 31. As of Aug 1, 2020, the company operated 3,100 stores across 27 countries in North America, Europe, Asia, Australia and New Zealand. Apart from these, there are 134 franchised Foot Locker stores in the Middle East and four franchised Runners Point stores in Germany.

Other Financial Details

This Zacks Rank #3 (Hold) company ended fiscal second quarter with cash and cash equivalents of $1,373 million, long-term debt of $121 million, and shareholders’ equity of $2,403 million. The company has repaid the $330 million earlier borrowed from its credit facility.  As of Aug 1, 2020, merchandise inventories were $1,194 million, down 2.7% from the prior-year period. On a constant-currency basis, inventory declined 3.7%.

As part of its cash-preservation actions, management did not pay dividend or buy back shares in the reported quarter. However, it announced a quarterly cash dividend of 15 cents per share, to be paid out on Oct 30, 2020 to shareholders of record as on Oct 16.

Don’t Miss These Solid Retail Bets

Big Lots BIG has an expected long-term earnings growth rate of 7.1% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sprouts Farmers Market SFM has an expected long-term earnings growth rate of 9.2% and a Zacks Rank #2 (Buy).

Dollar General DG, also a Zacks Rank #2 stock, has a long-term earnings growth rate of 12.5%.

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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.

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