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Foot Locker (FL) Q4 Earnings & Revenues Surpass Estimates

Foot Locker, Inc. FL posted fourth-quarter fiscal 2022 results, wherein both the top line and the bottom line beat the Zacks Consensus Estimate. The company delivered the 11th straight earnings beat in the reported quarter. However, both earnings and revenues declined year over year, leading to a 5.7% fall in FL shares during the trading session of Mar 20.

Over the past six months, shares of this Zack Rank #3 (Hold) company have increased 10.7% compared with the industry’s growth of 8.7%.

Q4 Metrics

The athletic shoes and apparel retailer posted adjusted earnings of 97 cents per share, which surpassed the Zacks Consensus Estimate of 52 cents. The bottom line decreased from adjusted earnings per share of $1.46 recorded in the prior-year quarter.

Total sales of $2,334 million surpassed the Zacks Consensus Estimate of $2,149 million. However, the metric declined 0.3% from the year-ago reported period. Excluding the foreign-currency fluctuation impact, total sales grew 3.6%. Digital penetration was 17% of net sales in the reported quarter.

Comparable-store sales (comps) inched up 4.2% driven by increased traffic and improved access to high-quality inventory.

Foot Locker, Inc. Price, Consensus and EPS Surprise

Foot Locker, Inc. Price, Consensus and EPS Surprise
Foot Locker, Inc. Price, Consensus and EPS Surprise

Foot Locker, Inc. price-consensus-eps-surprise-chart | Foot Locker, Inc. Quote

An Insight Into Margins

Foot Locker's gross-margin rate in the reported quarter dropped 290 basis points (bps) from the prior-year quarter’s tally. Higher markdowns on increased promotional activity across the industry caused a margin decline.

The selling, general and administrative (SG&A) expenses decreased by 10 bps as a percentage of sales from the prior year due to savings from the cost optimization program partially offset by inflation.

Store Update

During the fiscal fourth quarter, Foot Locker opened 21 stores and remodeled or relocated 45 outlets. FL closed 101 stores during the aforementioned period.

As of Jan 28, 2023, Foot Locker operated 2,714 stores across 29 countries in North America, Europe, Asia, Australia and New Zealand.  Also, FL had 159 franchised stores operating in the Middle East and Asia.

For fiscal 2023, management expects to open 100 new stores and close roughly 330 stores. The company is optimizing its stores by bringing the store count down to 2,400 stores by 2026.

Other Financial Details

Foot Locker ended the fiscal fourth quarter with cash and cash equivalents of $536 million. Long-term debt and obligations under finance leases amounted to $446 million and shareholders’ equity summed $3,293 million. As of Jan 28, 2023, merchandise inventories were $1.6 billion, up 29.8% from the year-earlier quarter’s end-level.

During the fourth quarter of fiscal 2022, Foot Locker paid a quarterly dividend of 40 cents per share. In entire fiscal 2022, FL repurchased 4.1 million shares for a total of $129 million and paid a total of $150 million in dividends.

Outlook

For fiscal 2023, management expects the sales to decline 3.5-5.5% including 1% from the extra week and the comps to fall 3.5-5.5% year over year. Gross margin is anticipated in the range of 30.8-31% and the SG&A rate is forecast at 22.6-22.8%.

The company envisions fiscal 2023 adjusted earnings per share of $3.35-$3.65, including 15 cents from the extra week. Management predicts adjusted capEx at $305 million for fiscal 2023.

Foot Locker’s Lace Up plan appears to be encouraging. FL has set long-term targets for fiscal 2024 through 2026 and expects total sales growth in the range of 5-6%, comparable sales growth of 3-4% and adjusted EPS growth of low to mid-twenties.

3 Key Picks

Some top-ranked stocks are Inter Parfums IPAR, The Kroger Co. KR and NIKE, Inc. NKE.

IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 10.6% and 0.8%, respectively, from the year-ago reported numbers.

The Kroger Co. operates in the thin-margin grocery industry. It currently carries a Zacks Rank of 2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.

The Zacks Consensus Estimate for Kroger’s current financial year sales and earnings suggests growth of 2.5% and 6.2%, respectively, from the prior-year reported numbers.

NIKE, engaged in the business of designing, developing and marketing of athletic footwear, currently carries a Zacks Rank of 2. NKE has a trailing four-quarter earnings surprise of 15.8%, on average.

The Zacks Consensus Estimate for NIKE’s’ current financial year sales suggests growth of 7.2% from the corresponding year-ago reported figures.

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