Foot Locker (FL) On Fire: What Is Driving The Stock Higher?

Shares of Foot Locker, Inc. (NYSE:FL) have gained nearly 20% in the past three months, buoyed by better-than-expected earnings and effective implementation of its operational and financial initiatives. Additionally, the stock holds a Zacks Rank #2 (Buy) with a long-term earnings growth rate of 9.8% and a VGM Score of “A”.

After commencing fiscal 2016 on a soft note, Foot Locker made a quick recovery with better-than-expected results in the second quarter. Sturdy comparable sales performance, cost-containment efforts and strategic initiatives supported the company’s year-over-year growth in both the top line and the bottom line. Management reaffirmed its projection of a mid-single digit increase in comparable sales in fiscal 2016. Foot Locker continues to anticipate double-digit growth in earnings per share for the fiscal year.

Following Foot Locker’s sturdy performance, the Zacks Consensus Estimate witnessed an uptrend as analysts raised their estimates. Analysts polled by Zacks are convinced that the stock will see strong performance in the future as well. Over the past 30 days, the Zacks Consensus Estimate for fiscal 2016 increased by 5 cents to $4.76.

The company’s stellar performance is driven by effective implementation of its operational and financial initiatives. Management believes that by persistently cashing in on opportunities like kids’ and women’s business, shop-in-shop expansion in collaboration with its vendors (such as House of Hoops, PUMA Labs, Jordan Flight 23 shops and The ARMOURY at Champs Sports), 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. Europe, Canada and the Asia Pacific regions observed healthy performance in the quarter under review. The company is also focusing on enhancing its e-commerce platform, growing direct-to-consumer operations, margin expansion and tapping underpenetrated markets.

Other Stocks that Warrant a Look

Other stocks from the same sector that warrant a look include The Children's Place, Inc. (NASDAQ:PLCE) , Tilly's, Inc. (NYSE:TLYS) and Urban Outfitters Inc. (NASDAQ:URBN) . All these stocks sport a Zacks Rank #1 (Strong Buy).

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