Get the Latest Investment Ideas Delivered Straight to Your Inbox.

TICKERS: FL

Foot Locker Shares Trip and Fall on Lower Than Expected Earnings

Source:

Foot Locker Inc. shares set a 52-week intraday low after the firm reported Q2/19 earnings. The firm's shares are trading down more than 18% compounded by a day of market worries from China tariffs escalation.

Global specialty athletic retailer Foot Locker Inc. (FL:NYSE) announced financial results for its second quarter ended August 3, 2019.

The company indicated that comparable-store sales in Q2/19 increased 0.80% over Q2/18. Total Q2/19 sales decreased 0.40% to $1,774 million, compared to $1,782 million for Q2/18. Excluding the effect of foreign exchange rate fluctuations, total sales for the Q2/19 increased 0.80%. The company's gross margin rate decreased to 30.1% from 30.2% a year ago. SG&A expense rate increased to 22.2% from 21.3% in Q2/19, largely reflecting the ongoing investments the company is making in its digital capabilities and infrastructure.

The company reported that net income for Q2/19 was $60 million, or $0.55 per share, compared to$88 million, or $0.75 per share in Q2/18. Included in the Q2/19 results are a $13 million charge related to the lease termination costs incurred in connection with the closure of certain SIX: 02 locations, a $1 million charge recorded in connection with the firm's pension matter, and a $2 million tax charge in connection with U.S. tax reform. Excluding these items, non-GAAP earnings were $72 million, or $0.66 per share for Q2/19 versus $0.75 per share in Q2/18.

Net income for H2/19 decreased to $232 million, or $2.08 per share on a GAAP basis, compared to $253million, or $2.14 per share for H2/18. On a non-GAAP basis, earnings per share for H2/19 totaled $2.20, compared to $2.21 per share in H1/18. Year-to-date sales in H2/19 were $3,852 million, an increase of 1.2% compared to $3,807 million in H1/18. Year-to-date, comparable store sales in H2/19 increased 2.8%, while total year-to-date sales, excluding the effect of foreign currency fluctuations, increased by 2.9%.

Richard Johnson, president and CEO of the company commented, "While our results in the second quarter did come in at the low end of our expectations, we saw improvement in our performance as we moved through each month of the quarter...We remain deeply connected with sneaker and youth culture, and believe this positive momentum exiting the quarter has us well positioned for the back-to-school period and beyond. Further, our team continues to make meaningful progress against our long-term strategic imperatives."

The company provided a store base update indicating that during Q2/19, the company opened 10 new stores, remodeled or relocated 35 stores, and closed 37stores, and as of August 3, 2019 operated 3,174 stores in 27 countries. Additionally, 123 franchised Foot Locker stores were operating in the Middle East, as well as 10 franchised Runners Point stores in Germany.

As of August 3, 2019, the company's merchandise inventories were $1,227 million, 2.2% lower than at the end of the second quarter last year. Using constant currencies, inventory decreased 1.0%. Lauren Peters, the company's EVP and CFO stated, "In addition to making meaningful investments in our stores and digital capabilities during the quarter, we maintained our disciplined approach to inventory management and are set-up to continue flowing fresh, exciting product offerings for the back-half of 2019...We remain optimistic that we can deliver a mid-single digit comparable sales gain for the full year and high-single digit adjusted EPS growth."

Headquartered in New York City, Foot Locker describes itself as a leading global retailer of athletically inspired shoes and apparel. The company operates approximately 3,200 athletic retail stores in 27 countries, as well as websites and mobile apps, under the brand names Foot Locker, Champs Sports, Eastbay, Kids Foot Locker, Footaction, Lady Foot Locker, Runners Point and Sidestep. With its various marketing channels and experiences across North America, Europe, Asia, Australia and New Zealand, the company's purpose is to inspire and empower youth culture around the world, by fueling a shared passion for self-expression and creating unrivaled experiences at the heart of the sport and sneaker communities.

Foot Locket shares opened lower today on the news at $37.01 (-$4.92, -11.73%) compared to the prior day's close of $41.93. This morning in greater than five-times average daily volume the stock slid to a 52-week low intraday price trading between $34.41 and $38.15/share, and closed at $34.00 (-$7.93, -18.91%).

[NLINSERT]

Disclosure:
1) Stephen Hytha compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.




Want to read more about Technology investment ideas?
Get Our Streetwise Reports Newsletter Free and be the first to know!

A valid email address is required to subscribe