What Happened: Shares of footwear and apparel retailer Foot Locker (NYSE:FL) jumped 5.07% in the morning session after supplier Nike (NYSE:NKE) reported first-quarter earnings that impressed Wall Street. Nike expects gross margin to expand for the next quarter and the full year as it winds down its inventory and plans for "markdown improvements." Nike also guided full year revenue to grow mid-single digits and expects second quarter revenue to come in slightly better than the same period last year.
Nike is Foot Locker's biggest supplier. When Nike does well, Foot Locker tends to do well, too. Footlocker is currently in the second quarter of its business reset with Nike as it expects more portion of future revenue to come from other brands as Nike focuses more on its direct-to-consumer channels.
Regardless, Nike's strong earnings report suggests that demand for its shoes and apparel is still strong, even as some retailers are struggling. This is good news for Foot Locker, as it means that customers are still coming to its stores to buy Nike products.
After the initial pop the shares cooled down to $17.31, up 2.06% from previous close.
Is now the time to buy Foot Locker? Find out by reading the original article on StockStory.
What is the market telling us: Foot Locker's shares are not very volatile than the market average and over the last year have had only 21 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was about one month ago, when the stock gained 5.47% on the news that the company reported second quarter earnings that missed analysts' revenue and earnings per share estimates. In addition, it posted lower-than-expected margins (likely driven by markdowns on items to move merchandise) and paused its dividend to free up resources. Lastly, the company continued to burn cash.
Moving ahead, Foot Locker lowered its full-year revenue and EPS estimates again after doing the same just five months ago during its Q1 earnings. Turning to macro, CEO Mary Dillon noted that the company is seeing a tough consumer backdrop, calling consumers price sensitive.
Overall, this was a bad quarter for Foot Locker, as the outlook suggests that sales and profits could face pressure in the latter half of the year.
Foot Locker is down 53.3% since the beginning of the year, and at $17.31 per share it is trading 62.8% below its 52-week high of $46.54 from February 2023. Investors who bought $1,000 worth of Foot Locker's shares 5 years ago would now be looking at an investment worth $344.92.
