HomeMost PopularInvestingFoot Locker Inc. Reports Earnings Beat, But Sales Stumble

Foot Locker Inc. Reports Earnings Beat, But Sales Stumble

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Foot Locker, Inc. posted third-quarter fiscal 2023 results, beating earnings estimates, but the victory was overshadowed by a drop in sales. The athletic shoes and apparel retailer revealed adjusted earnings of 30 cents per share, trumping the consensus estimate of 23 cents per share. However, this figure declined from the prior year’s earnings of $1.27 per share.

Stumbling Sales

Total sales of $1,986 million surpassed the Zacks Consensus Estimate of $1,965 million, but the year-over-year decline of 8.6% was a setback for the company. Excluding the impact of foreign-currency fluctuations, the total sales experienced a significant 10% tumble. Comparable-store sales (comps) also suffered, plummeting 8% due to persistent consumer softness, changing vendor mix and the adverse impact of the repositioning of Champs Sports.

Margin Woes

The gross margin rate nosedived by 470 basis points from the prior year due to increased markdowns, occupancy deleverage, and elevated shrink. Selling, general and administrative (SG&A) expenses also inflated, increasing 100 basis points as a percentage of sales from the prior year.

Store Update

During the fiscal third quarter, Foot Locker expanded its footprint by opening 22 stores and renovating or relocating 36 outlets while closing 14 stores. As of October 28, 2023, the company operated 2,607 stores across 26 countries in North America, Europe, Asia, Australia, and New Zealand. Additionally, Foot Locker had 190 franchised stores operating in the Middle East and Asia.

Financial Highlights and Outlook

The company ended the fiscal third quarter with cash and cash equivalents of $187 million, long-term debt and obligations under finance leases amounted to $443 million, and shareholders’ equity summed at $3,205 million. Looking ahead, management expects a sales decline of 8-8.5% for fiscal 2023, with comps projected to fall 8.5-9% year over year. The gross margin is anticipated to be in the range of 27.8-27.9%, while the SG&A rate is forecast to be 22.8-22.9%. The company envisions fiscal 2023 adjusted earnings per share of $1.30-$1.40.

Market Performance and Key Picks

Despite the financial setbacks, Foot Locker’s stock has seen a 28.5% uplift over the past three months, outperforming the industry’s 7.6% rise. Despite this, the company faces stiff competition from retail apparel giants such as Abercrombie & Fitch, The Gap, and American Eagle Outfitters.

Abercrombie & Fitch, The Gap, and American Eagle Outfitters have emerged as strong contenders, each with its own unique strengths and optimistic growth prospects.

Investor Advice

As the financial market continues to swing like a pendulum, investors are advised to conduct thorough due diligence before making any investment decisions. It’s a clamorous industry, and only the shrewd will emerge victorious.

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