Foot Locker Tops Street In Q2 With Robust Comp Growth

Foot-Locker-Storefront
A Foot Locker Storefront.
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The champ is here.

Analysts said Foot Locker Inc.’s second quarter has offered up more evidence that the retailer far outpaces its competition in the athletic specialty footwear space.

The New York-based retailer saw a 29 percent increase in net income, a nearly 10 percent rise in comparable store sales, and blew past Wall Street’s EPS forecast for the quarter.

Foot Locker CFO and EVP Lauren Peters said the solid quarter was buoyed by the firm’s organic sales growth and solid direct-to-consumer business (up 19 percent) — with footwear leading the momentum.

“Footwear was once again the strongest category, posting a low double-digit sales increase, and our apparel business improved significantly, posting a mid-single-digit sales increase,” Peters said during Foot Locker’s Q2 conference call. “Within footwear, running and basketball both posted double-digit increases.”

Similar to the first quarter, however, Peters said reported sales were reduced by more than $100 million in Q2 due to the impact of FX headwinds.

Looking ahead, the firm said it would continue to make digital investments a priority.

Net Income: Net income for the second quarter, ending Aug. 1, 2015, was $119 million, up 29 percent from the comparable quarter when net profits were $92 million.

EPS: Earnings per diluted share were 84 cents, compared to the same year-ago quarter when diluted EPS were 63 cents, a 33 percent rise.

Net Revenue: Total sales increased 3.3 percent, to $1.7 billion compared to sales of $1.6 billion for the corresponding prior-year period.

Adjustments: Excluding the effect of foreign currency fluctuations, the company said its total sales in Q2 increased 9.9 percent.

Hit, Miss or Beat: Foot Locker beat market watchers’ forecasts for EPS and was in-line to slightly above revenue estimates. Analysts polled by Yahoo Finance had predicted EPS of 69 cents and revenues of $1.66 billion. (Foot Lockers’ revenues were approximately $1.69 billion.)

Executive Insights: “We certainly intend to continue building on many of our strengths, one of which is the remarkable consistency of our performance across channels, banners, geographies, genders and categories.” – Foot Locker CEO Richard Johnson, Q2 conference call.

* Johnson on Digital:

“With steady high teens sales increases with strong margins, our digital performance sometimes almost seems automatic. But having come from that business, I know how much really hard work goes into producing such consistently-strong results. It takes a lot of technology investments, product and marketing coronation with our store teams, analysis of massive amounts of data and outstanding customer service to be a leader in the omnichannel world, and we continue to be just that.”

* Johnson on Champs and Footaction:

“While posting a comp loss, the apparel business at Champs Sports also improved sequentially, driven by the same branded bottoms trends as in our other U.S. divisions as well as its private label Champs Sports Gear mid-shorts and jogger pants. …  Clearly the core business remains strong with strong connections to the different core customers of the Foot Locker, Champs Sports and Footaction banners. We are continuing to invest in the remodel programs and expect to have touched at least 30 percent of the Champs stores and our Foot Locker fleet in the U.S. by the end of 2015 and we will begin to catch up at Footaction as we move into the rollout mode with the Garden State Plaza design in that banner.”

* Peters on Back-To-School:

“With the later start of back-to-school this year, we do believe that there is a good chance for sales to be at the strong end of mid-single digits both this quarter and over the second half of the year.”

Analyst Insights: “Foot Locker is clearly taking share from Finish Line Inc., Hibbett Sports and likely many others and continues to prove that it is the best-in-class athletic retailer.” – Sam Poser, Sterne Agee CRT analyst.