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4-Traders Homepage  >  Equities  >  Nyse  >  Foot Locker, Inc.    FL

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Foot Locker 1Q Net Jumps 36% As Sales Rise

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05/18/2012 | 06:36pm CET

-- New styles, materials are being used in athletic gear, driving consumers to retail chains that sell those wares

-- Results easily exceeded Wall Street's expectations, sending Foot Locker and Finish Line shares higher

-- Foot Locker spent more on marketing, helping drive higher traffic and conversion rates

(Adds details from the company's conference call and the latest stock quote throughout.)

 
   By John Kell 
   Of  
 

Foot Locker Inc.'s (>> Foot Locker, Inc.) fiscal first-quarter earnings jumped a bigger-than-expected 36% as new materials and colors used in footwear and apparel gear led to higher sales for the athletic retail chain.

The company's results easily topped Wall Street's expectations, sending shares up 9.9% to $30.78 in recent trading. Smaller rival Hibbett Sports Inc. (>> Hibbett Sports, Inc.) also turned in a strong first-quarter report Friday, logging a double-digit jump in same-store sales and wider margins.

The rosy news also gave rival Finish Line Inc. (>> Finish Line Inc) a pop, with that company's shares rising 6.1% to $21.47.

Foot Locker has now logged nine straight quarters of year-over-year sales and earnings growth as new products from Nike Inc. (>> NIKE, Inc.), Under Armour Inc. (>> Under Armour Inc) and other apparel and footwear makers continue to power demand in the running, basketball and lifestyle categories. New styles, colors and materials are being used in athletic gear, which helps drive consumers to the retail chains that sell those wares.

But concerns about how economic malaise has hurt European sales has knocked shares of retailers expanding or with heavy exposure in the region. Shoe makers Deckers Outdoor Corp. (>> Deckers Outdoor Corp) and Wolverine World Wide Inc. (WWW) have recently cited weak demand in Europe in their latest quarterly reports.

Foot Locker's European same-store sales declined by a mid-single-digit percentage in the latest quarter, weakness that mirrored a trend seen among other retailers. But Chief Financial Officer Lauren Peters said sales trends improved in March and April, though she cautioned demand may seesaw as the economy remains challenging. Every other region Foot Locker operates in reported same-store sales growth.

Roughly 30% of Foot Locker's sales are derived from abroad, according to The Benchmark Co., and the stores in Europe have traditionally been more profitable than domestic locations due to a higher percentage of full-price sales.

But even as global economic concerns have heightened in recent months, demand for athletic gear has held up well and the upcoming European Football Championship and Olympics should offer some support abroad this year.

Foot Locker, which is more exposed to the basketball category than Finish Line, said that business had a stellar quarter and outpaced demand for running gear as new colorful shoes in the fashion-driven category drove demand. Chief Executive Ken Hicks said key player shoes named after LeBron James, Kobe Bryant and Kevin Durant sold "exceptionally well" during the quarter. Hicks added color was a consistent theme in all athletic categories, a trend Hicks sees continuing.

For the quarter ended April 28, the company posted a profit of $128 million, or 83 cents a share, compared with a year-earlier profit of $94 million, or 60 cents a share.

Sales increased 8.7% to $1.58 billion, or 9.8% excluding the impact of foreign currency fluctuations.

Analysts were looking for earnings of 74 cents a share on revenue of $1.55 billion, according to a poll conducted by Thomson Reuters.

Gross margins widened to 34% from 32.7% on the increased sales.

Same-store sales jumped 9.7%, building on a 13% increase last year. Inventory at the end of the quarter was 1.1% lower than the year earlier, at $1.15 billion.

Peters said Foot Locker spent more on marketing in the latest quarter than a year ago, an investment that's helped drive higher traffic and conversion rates. For the men's business, basketball footwear was a key driver of strength, though retro training footwear and Jordan and Adidas classics sold well. Kids sales were also strong but women's footwear results were mixed.

Total apparel sales jumped nearly 20%, though Europe's same-store apparel business declined modestly in the face of tough market conditions there.

-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

-Mia Lamar contributed to this article

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Financials ($)
Sales 2017 7 767 M
EBIT 2017 1 001 M
Net income 2017 646 M
Finance 2017 767 M
Yield 2017 1,52%
P/E ratio 2017 14,85
P/E ratio 2018 13,51
EV / Sales 2017 1,11x
EV / Sales 2018 1,06x
Capitalization 9 398 M
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Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 80,1 $
Spread / Average Target 13%
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Managers
NameTitle
Richard A. Johnson Chairman, President & Chief Executive Officer
Lauren B. Peters Chief Financial Officer & Executive Vice President
Pawan Verma Chief Information Officer & Senior Vice President
Jarobin Gilbert Independent Director
Cheryl Nido Turpin Independent Director
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