Are Investors Skeptical About Foot Locker (FL) Q2 Earnings?

Foot Locker, Inc. (NYSE:FL) is slated to release second-quarter fiscal 2017 results on Aug 18. The question lingering in investors’ minds is whether this retailer of athletic shoes and apparel will be able to deliver a positive earnings surprise in the quarter to be reported. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 2.1%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is 90 cents compared with 94 cents reported in the year-ago period. We noted that the Zacks Consensus Estimate has decreased by 2 cents in the past 30 days. Analysts polled by Zacks expect revenues of $1,821 million, up about 2.3% from the year-ago quarter.

Factors at Play

We believe by continually capitalizing on opportunities like children’s business, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments, Foot Locker is likely to benefit in the long run. International expansion, especially in Europe, is another growth catalyst. Further, the company is enhancing its eCommerce platform.

However, we are concerned about the company’s sales and comparable-store sales performance. We noticed that Foot Locker’s total sales and comparable-store sales witnessed a marginal increase of 0.7% and 0.5%, respectively, in the first quarter of fiscal 2017, which are in sharp contrast to the company’s performance in fiscal 2016.

During the first, second, third and fourth quarters of last fiscal total sales increased 3.7%, 5%, 5.1% and 5.3%, respectively. Maintaining the same chronological order comps rose 2.9%, 4.7%, 4.7% and 5%, respectively. Management now projects low-single-digit growth in comparable sales with a relatively flat earnings year over year for the second quarter.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Foot Locker is likely to beat on earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Foot Locker has an Earnings ESP of -3.33% as the Most Accurate estimate is at 87 cents, while the Zacks Consensus Estimate is pegged higher at 90 cents. The company carries a Zacks Rank #3, which when combined with the negative Earnings ESP, makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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 an earnings beat:

Burlington Stores, Inc. (NYSE:BURL) has an Earnings ESP of +4.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Big Lots, Inc. (NYSE:BIG) has an Earnings ESP of +6.56% and a Zacks Rank #3.

DSW Inc. (NYSE:DSW) has an Earnings ESP of +3.45% and a Zacks Rank #3.

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