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Foot Locker (FL) Q2 Earnings Meet, Revenues Lag, Stock Falls

Zacks Equity Research

Shares of Foot Locker, Inc. FL are down roughly 11% in the pre-market trading session. The stock declined following the company’s second-quarter fiscal 2019 results, wherein the bottom line met the Zacks Consensus Estimate but the top line fell short of the same for the second quarter in row. Also, both sales and earnings per share decreased year over year. We note that the rate of growth of comparable-store sales decelerated sharply on a sequential basis. Moreover, gross margin remained under pressure.

Management stated that results came in at the low end of expectations. Nonetheless, Foot Locker remains optimistic about attaining mid-single digit comparable sales increase and high-single digit adjusted earnings per share growth for fiscal 2019.

We note that shares of this Zacks Rank #3 (Hold) company have plunged roughly 30% compared with the industry’s decline of 33% in the past six months.

This operator of athletic shoes and apparel retailer reported adjusted earnings of 66 cents a share that came in line with the consensus mark. However, earnings declined 12% from the year-ago period. This can be attributed to lower sales and higher SG&A expenses.

Foot Locker, Inc. Price, Consensus and EPS Surprise

The company generated total sales of $1,774 million that fell 0.4% year over year and came below the consensus estimate of $1,828 million. Excluding the effect of foreign currency fluctuations, total sales rose 0.8%. Meanwhile, comparable-store sales rose 0.8% during the quarter under review, following an increase of 4.6% in the preceding quarter.

Foot Locker's gross margin rate contracted 10 basis points to 30.1% during the quarter. We note that SG&A expense rate deleveraged 90 basis points to 22.2% due to strategic investments in digital capabilities and infrastructure. Management had earlier projected gross margin to be flat to down 20 basis points and SG&A expenses rate to increase 80-100 basis points in the second quarter.

Store Update

During the quarter, Foot Locker opened 10 new outlets, remodeled or relocated 35 stores, and shuttered 37. As of Aug 3, 2019, the company operated 3,174 outlets across 27 countries in North America, Europe, Asia, Australia and New Zealand. Apart from these, there are 123 franchised Foot Locker stores in the Middle East. Germany has 10 franchised Runners Point stores.

Other Financial Details

Foot Locker ended the quarter with cash and cash equivalents of $939 million, long-term debt of $123 million, and shareholders’ equity of $2,512 million. During the quarter, the company repurchased 2.9 million shares for $120 million.

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Click to get this free report Fossil Group, Inc. (FOSL) : Free Stock Analysis Report Foot Locker, Inc. (FL) : Free Stock Analysis Report Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report To read this article on click here. Zacks Investment Research