Foot Locker Q3 Earnings Miss Expectations, 2024 View Down

Foot Locker, Inc. FL posted third-quarter fiscal 2024 results, with both bottom and top lines lagging the Zacks Consensus Estimate. The company’s revenues decreased and earnings increased from the year-ago quarter. The company saw positive comparable sales trends and gross margin expansion, but third-quarter performance fell short due to softened consumer spending after the Back-to-School period and a more promotional environment. Progress continued with the Lace Up Plan and partnerships, including the 'Home Court' experience with Nike and Jordan Brand and a deal with the Chicago Bulls. While early November trends were weak, there was a strong acceleration during Thanksgiving week. The company lowered its full-year outlook due to softer demand and a more promotional environment but remains focused on growth through new store formats, a revamped digital experience and enhanced customer engagement, aiming for an 8.5-9% EBIT margin by 2028. Over the past three months, FL shares have lost 11.9% against the industry’s 22.4% growth.Foot Locker, Inc. Price, Consensus and EPS Surprise Foot Locker, Inc. price-consensus-eps-surprise-chart | Foot Locker, Inc. QuoteMore on Foot Locker’s Q3 Financial ResultsThe athletic shoes and apparel retailer posted adjusted earnings of 33 cents per share, which missed the Zacks Consensus Estimate of adjusted earnings of 39 cents. However, the figure increased from adjusted earnings per share (EPS) of 30 cents in the prior-year quarter.Total revenues of $1,961 million decreased 1.4% from the year-ago period. Excluding the impacts of foreign-currency fluctuations, total sales decreased 2.2%. Revenues missed the Zacks Consensus Estimate of $2,001 million. Comparable sales increased 2.4% year over year, driven by a 2.8% increase in global Foot Locker and Kids Foot Locker sales. Notably, the Champs Sports and WSS banners also reported positive comparable sales growth of 2.8% and 1.8%, respectively.Insight Into FL’s MarginsFL's gross margin rate increased 230 basis points (bps). This was primarily due to lower markdown levels. We expected the gross margin to increase 280 bps year over year in the quarter under review.The selling, general and administrative (SG&A) expenses, as a percentage of sales, increased 210 bps from the prior-year period. This increase was due to investments in technology and brand-building investments. However, it was partially offset by savings from the cost-optimization program and ongoing expense discipline. We anticipated SG&A expenses, as a percentage of sales, to expand 200 bps.Image Source: Zacks Investment ResearchFoot Locker Provides Q3 Store UpdateIn the fiscal third quarter, the company inaugurated 10 stores and closed 24 stores. Moreover, during this period, it remodeled or relocated 20 stores and modernized 167 stores to adhere to its latest design standards, integrating essential aspects of its current brand specifications.As of Nov. 2, 2024, FL managed 2,450 stores across 26 countries in North America, Europe, Asia, Australia and New Zealand. Also, 214 franchised stores were operational in the Middle East and Asia.FL’s Financial Snapshot: Cash, Debt and Equity OverviewThis Zacks Rank #3 (Hold) company ended the fiscal third quarter with cash and cash equivalents of $211 million. Long-term debt and obligations under finance leases amounted to $440 million and shareholders’ equity totaled $2.87 billion. As of Nov. 2, 2024, merchandise inventories were $1.74 billion, down 6.3% from the year-earlier quarter.What Lies Forward for Foot Locker?The company’s fourth quarter of fiscal 2024 guidance suggests an expected revenue decline between 3.5% and 1.5%, with comparable sales projected to grow by 1.5% to 3.5%. Gross margin is anticipated to be in the range of 29-29.2%, while the SG&A rate is expected to fall between 22.3% and 22.5%, driven by investment spending. The EBIT margin for the fourth quarter is forecasted to range from 4.5% to 5%. Adjusted EPS is expected to be between 70 cents and 80 cents.For fiscal 2024, the company projects revenues to decline between 1.5% and 1% compared with prior guidance of 1% decline to 1% growth. Comparable sales growth guidance has narrowed to 1-1.5% from the previous range of 1-3%. Gross margin guidance has been lowered to 28.7-28.8% from the previous guidance of 29.5-29.7%, due to an elevated promotional environment. The SG&A rate is now forecasted in the range of 24-24.1%, slightly better than the previously guided range of 24.1-24.3%, suggesting tighter cost management despite investment spending. EBIT margin guidance for the full year has been revised to 2.3-2.5% compared with the prior guided range of 2.8-3.2%. Adjusted EPS guidance is expected in the range of $1.20-$1.30, down from the previous guidance of $1.50-$1.70. Capital expenditures are now expected to be $270 million, slightly below the prior estimate of $275 million, while adjusted capital expenditures have been revised to $320 million from $330 million, suggesting a focus on technology investments.Key PicksSome better-ranked stocks are The Gap, Inc. GAP, Abercrombie & Fitch Co. ANF and Steven Madden, Ltd. SHOO.Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Gap’s fiscal 2025 earnings and sales indicates growth of 40% and 0.8%, respectively, from fiscal 2024 reported figures. GAP has a trailing four-quarter average earnings surprise of 101.2%.Abercrombie is a specialty retailer of premium, high-quality casual apparel. It carries a Zacks Rank of 2 (Buy) at present.The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 67.5% and 14.9%, respectively, from the fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 14.8%.Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank of 2. The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 8.6% and 13.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.8%.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report Foot Locker, Inc. (FL): Free Stock Analysis Report The Gap, Inc. (GAP): Free Stock Analysis Report Steven Madden, Ltd. (SHOO): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks