This Retailer’s Earnings Could Be A Slam Dunk

Photo Credit: Mike Mozart

Foot Locker, Inc (FL) Consumer Discretionary – Specialty Retail | Reports May 20, Before Market Opens

The tides have turned in the retail space in the past few days. After a handful of dismal weeks, names like American Eagle, Lowe’s, and Walmart defied current trends and crushed expectations. Foot Locker hopes to continue the latter trend when it reports first quarter earnings tomorrow morning.

The Estimize consensus is calling for earnings per share of $1.42 on $2.01 billion in revenue, 2 cents higher than Wall Street on the bottom line and right in line on the top. Compared to a year earlier, estimates reflect a 9% increase in earnings with sales expected to grow by 5%. It’s unlikely shareholder’s will reconcile the 11.3% losses from the stock has seen this year. On average shares move up and down leading up and following earnings. 

In the last 9 quarters, the New York City based chain has beaten analyst expectations with impressive earnings surprise numbers. Driving this success has been the popularity of basketball shoes, a niche that Foot Locker has clearly carved out. Basketball shoes account for a large portion of Foot Locker sales, as the company holds most of the major brand names. Yearly special releases of “Jordan’s,” “LeBron’s” and even one of Adidas’s most highly touted releases of all-time, the new Derrick Rose sneaker, bolstered same store sales over the holiday quarter, rising 7.9% in Q4. Foot Locker is more than proficient in several of the other lines it carries as well, mainly running and casual.

Foot Locker does a great deal of business outside of the United States. They have high exposure to some of the largest international markets as roughly 30% of 2015 total sales came from abroad. The strength of the US dollar throughout 2015 was responsible for an $0.23 impact on EPS vs. 2014 for the athletic retailer, who then had to increase prices to help offset. The FX impact may amount to a few cents in 2016, but the company believes we have “cycled through a bulk of the FX impact” as the dollar begins to stabilize.