“Q2 is no layup” for athletic specialty retail giant Foot Locker Inc., says UBS Investment Bank analyst Michael Binetti.
While Wall Street beats had become the norm for Foot Locker Inc., following an in-line Q1, analysts say they’re now expecting a more tame second-quarter performance when the company reports earnings before the market open Friday.
“We expect Foot Locker to report generally in-line Q2 results,” Canaccord Genuity Inc. analyst Camilo Lyon wrote on Aug. 15, reiterating a buy rating on the stock. “Despite the slow start to the quarter (negative Q2 [quarter-to-date] comp in May largely impacted by a timing shift of a significant Jordan launch), we believe demand trends improved as the quarter progressed.”
Meanwhile, Binetti points out that although Q2 is Foot Locker’s toughest same-store sales comparison in 2016 — against a 9.6 percent gain in the comparable period — he thinks same-store sales can still accelerate slightly compared with Q1.
“We’re forecasting a 3.5 percent [comp gain] versus 2.9 percent in Q1 based on [several factors, including] Sportscan [data, which showed that] total athletic footwear accelerated to 11 percent in Q2 versus 8 percent in Q1 [and that] basketball accelerated to [gains of] 9 percent in Q2 from 5 percent in Q1,” Binetti writes. “[And we believe] that Foot Locker was able to sequentially improve inventories in Q2 to address a consumer shift to casual/classic styles away from basketball — which should reduce a [near term] same-store sales headwind.”
Consensus estimates predict that Foot Locker’s Q2 diluted earnings per share will gain 6 cents year-over-year, to 90 cents, and revenues will climb 4 percent, to $1.76 billion.
Binetti and Lyon agree that the setup into Q3 looks stronger — with Binetti pointing to a possible beat and raise scenario.