Solid comparable-store sales growth and cost containment efforts helped Foot Locker, Inc. FL continue with its positive earnings surprise streak for the tenth straight quarter. The company’s fourth-quarter fiscal 20Array5 earnings of $Array.Array6 per share surpassed the Zacks Consensus Estimate of $Array.Array2 and surged Array6% from the prior-year quarter figure of $Array.00. In the trailing four quarters (including the quarter under review), this Zacks Rank #2 (Buy) stock outperformed the Zacks Consensus Estimate by an average of 9.4%.
Despite a 7.9% jump in comparable-store sales, Foot Locker’s total sales rose only 5% year over year to $2,007 million, as foreign currency headwinds hurt sales. Excluding the negative impact of foreign currency fluctuations, total sales increased 8.8%. The figure also came almost in line with the Zacks Consensus Estimate of $2,006 million.
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 70 basis points to 33.6% of sales, whereas the selling, general and administrative expense rate contracted 30 basis points to Array9.3% during the quarter.
Management now projects a mid single-digit increase in comparable sales in fiscal 20Array6. Foot Locker now anticipates an improvement of Array0–30 basis points in gross margin. Also, it expects to attain double-digit growth in earnings per share for the fiscal year.
Store Update
During fiscal 20Array5, Foot Locker opened ArrayArrayArray new outlets, remodeled or relocated 209 outlets, and shuttered Array5Array outlets. As of Jan 30, 20Array6, the company operated 3,383 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 Array6 franchised Runners Point stores. During fiscal 20Array6, the company plans to open approximately 90 outlets and close Array00 stores.
Other Financial Details
Foot Locker ended the quarter with cash and cash equivalents of $Array,02Array million, total long-term debt and obligations under capital leases of $Array30 million, and shareholders’ equity of $2,553 million.
During the fourth quarter, the company repurchased Array.64 million shares worth $Array03 million. During fiscal 20Array5, the company bought back approximately 6.7 million shares for $4Array9 million and also paid dividends of $Array39 million. The company had $637 million remaining under its $Array billion share buyback program.
The company incurred capital expenditure of $225 million during fiscal 20Array5. Its board of directors approved a $297 million capital expenditure plan for fiscal 20Array6 and increased the quarterly dividend by Array0% to 27.5 cents, which will be paid on Apr 29, to stockholders on record as of Apr Array5, 20Array6.
Other Stocks to Consider
Other favorably ranked stocks in the retail sector are Express Inc. EXPR, sporting a Zacks Rank #Array (Strong Buy), L Brands, Inc. LB and DSW Inc. DSW, both carrying a Zacks Rank #2.
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