Factors Setting the Tone for Foot Locker's (FL) Q2 Earnings

Foot Locker, Inc. FL is scheduled to release second-quarter fiscal 2019 results on Aug 23. In the trailing four quarters, the company has outperformed the Zacks Consensus Estimate by an average of 4.4%. However, the company’s bottom line underperformed the Zacks Consensus Estimate by 5% in the last reported quarter.

How Are Estimates Faring?

The Zacks Consensus Estimate for the to-be-reported quarter is pegged at 66 cents, suggesting a decline of roughly 12% from the year-ago quarter’s figure. We note that the Zacks Consensus Estimate has remained unchanged in the past 30 days. The Zacks Consensus Estimate for revenues currently stands at $1,821 million, indicating growth of approximately 2.2% from the year-ago quarter. In the last reported quarter, the company’s total sales improved 2.6%.

Factors at Play

Foot Locker is trying to improve performance through operational and financial initiatives. The company is focusing on development of supply chain, improvement of mobile and web platforms, and expansion of data analytics capabilities. The company is also focusing on augmenting direct-to-consumer operations, margin expansion, tapping underpenetrated markets and testing new retail concept, Power Stores. The company’s efforts to revamp and remodel stores are yielding results.

The aforementioned factors are most likely to influence the company’s performance in the to-be-reported quarter. Management had earlier guided low to mid single-digit gain in comparable sales during the second quarter of fiscal 2019.

In spite of these tailwinds, higher SG&A expenses remain a concern. We note that SG&A expense rate deleveraged 100 basis points to 20% due to strategic investments in digital capabilities and infrastructure during the last reported quarter. Management had previously guided SG&A expenses rate to increase 80-100 basis points in the second quarter. This may to an extent hurt the bottom line.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Foot Locker is likely to beat estimates this quarter. A stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Foot Locker has a Zacks Rank #3 but an Earnings ESP of 0.00%. This makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

Target TGT has an Earnings ESP of +1.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores BURL has an Earnings ESP of +1.13% and a Zacks Rank #2.

Costco COST has an Earnings ESP of +0.30% and a Zacks Rank #3.

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