Why Is Foot Locker (FL) Up 2.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Foot Locker (FL). Shares have added about 2.4% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Foot Locker due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. Foot Locker Q3 Earnings Miss Expectations, 2024 View DownFoot Locker 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.More 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. 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.Foot 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 OverviewThe 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.How Have Estimates Been Moving Since Then?It turns out, estimates revision have trended downward during the past month.The consensus estimate has shifted -23.26% due to these changes.VGM ScoresAt this time, Foot Locker has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Foot Locker has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Performance of an Industry PlayerFoot Locker belongs to the Zacks Retail - Apparel and Shoes industry. Another stock from the same industry, Urban Outfitters (URBN), has gained 12.2% over the past month. More than a month has passed since the company reported results for the quarter ended October 2024.Urban Outfitters reported revenues of $1.36 billion in the last reported quarter, representing a year-over-year change of +6.3%. EPS of $1.10 for the same period compares with $0.88 a year ago.For the current quarter, Urban Outfitters is expected to post earnings of $0.87 per share, indicating a change of +26.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Urban Outfitters. Also, the stock has a VGM Score of C.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. 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 Foot Locker, Inc. (FL): Free Stock Analysis Report Urban Outfitters, Inc. (URBN): 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