Foot Locker, Inc. (FL) saw a superb start to fiscal 2014 with first-quarter adjusted earnings of $1.11 a share surging 22% year over year and comfortably beating the Zacks Consensus Estimate of $1.06. Shares of this athletic footwear retailer climbed 1.6% after its earnings release.
On a GAAP basis, the company’s earnings came in at $1.10 a share, compared with 90 cents in the comparable period last year.
Further Insight
Driven by a 7.6% rise in comparable-store sales (comps), Foot Locker’s sales for the quarter improved 14% year over year to $1,868.0 million and easily surpassed the Zacks Consensus Estimate of $1,784.0 million.
The improvement in comps was mainly buoyed by the direct to consumer comps gain of 17.2%, backed by significant growth in the company’s banner.com business.
Owing to robust direct to consumer sales, gross profit for the quarter advanced 15.2% to $646.0 million with gross margin expanding 40 basis points (bps) to 34.6%. Further, the company achieved its best quarterly selling, general and administrative (SG&A) rate till date. SG&A, as a percentage of sales, improved 20 bps to 19% during the quarter.
Store Update
During the quarter, Foot Locker opened 27 outlets, shut down 36 outlets and relocated/renovated 49 outlets. As of May 3, 2014, the retailer operated 3,464 outlets across 23 countries in North America, Australia, New Zealand and Europe. Apart from these, the company has 47 franchised Foot Locker stores in South Korea and the Middle East. Moreover, in Germany and Switzerland, the retailer owns 27 franchised Runners Point and Sidestep stores.
Financial Details
Foot Locker ended the quarter with cash, cash equivalents and short-term investments of $1,007.0 million, total debt of $138.0 million and total shareholders’ equity of $2,593.0 million.
During the quarter, the company bought back 1.5 million shares worth nearly $70.0 million and paid a quarterly dividend of 22 cents a share, which translates to more than $100.0 million in cash returned to stockholders. Moreover, Foot Locker incurred $50.0 million as capital expenditure during the quarter.
Outlook
Management seems highly impressed with the way the company has started the fiscal. The stellar performance was a result of the effective implementation of the operational and financial plans. The improved top line consequently pulled up the bottom line, leading to better-than-expected results.
Management believes that by continuing to exploit opportunities like children’s business, shop-in-shop expansion in collaboration with its vendors, development of banner.com and enhancement of assortments, it is likely to benefit in the long run.
Given the solid quarter, the company reiterated its outlook for fiscal 2014. It continues to envision quarterly mid-single digit growth in comps and a double digit rise in earnings per share for the ongoing fiscal. The current Zacks Consensus Estimate for 2014 earnings is pegged at $3.24 per share.
Other Stocks to Consider
Foot Locker currently carries a Zacks Rank #2 (Buy). Other players in the retail industry, which look attractive at current levels, include Citi Trends, Inc. (CTRN), American Apparel, Inc. (APP) and Genesco Inc. (GCO). While Citi Trends carries a Zacks Rank #1 (Strong Buy), American Apparel and Genesco have the same Zacks Rank as Foot Locker.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment