Foot Locker (FL) Earnings Beat Estimates In Q3, Increase Y/Y

After reporting in-line earnings in the second quarter of fiscal 2019, Foot Locker, Inc. (NYSE:FL) reported a positive earnings surprise in the third quarter. However, total sales fell short of the Zacks Consensus Estimate for the third quarter in a row. Nonetheless, both the top and the bottom line increased year over year. Also, the rate of growth of comparable-store sales accelerated sharply on a sequential basis. Again, gross margin improved following a contraction in the preceding quarter.

As a result, shares of this New York-based company are up roughly 5% during the pre-market trading session. In fact, shares of this Zacks Rank #3 (Hold) company have soared 22% compared with the industry’s rise of 8% in the past three months.

This operator of athletic shoes and apparel retailer posted adjusted earnings of $1.13 per share that came ahead of the consensus mark of $1.07. The quarterly earnings surged 18.9% from the prior-year period reported figure of 95 cents. This can be attributed to higher sales as well as increased share repurchase activity.

Total sales of $1,932 million rose 3.9% year over year but came below the consensus estimate of $1,940 million. Excluding the effect of foreign currency fluctuations, total sales grew 5.1%. Meanwhile, comparable-store sales rose 5.7% during the quarter under review, following an increase of 0.8% in the preceding quarter.

Foot Locker's gross margin rate expanded 50 basis points to 32.1% during the quarter. We note that SG&A expense rate declined 10 basis points to 21.3%. Management had earlier projected gross margin expansion of 10-30 basis points and SG&A expense rate contraction of 10-30 basis points for the third quarter.

Store Update

During the quarter, Foot Locker opened 11 new outlets, remodeled or relocated 34 stores, and shuttered 25. As of Nov 2, 2019, the company operated 3,160 outlets across 27 countries in North America, Europe, Asia, Australia and New Zealand. Apart from these, there are 128 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 $744 million, long-term debt of $122 million, and shareholders’ equity of $2,427 million. During the quarter, the company repurchased 4.6 million shares for $178 million.

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