Foot Locker Momentum To Continue Into Q4

Foot Locker Inc. is seeing continued momentum into the fourth quarter despite the continuation of the NBA lockout and volatility in Europe.

Kenneth Hicks, chairman, president and CEO, said the firm has seen little impact on business to date.

“In fact, we are on track to sell more basketball shoes this year in our Foot Locker and Footaction divisions than in any year in our entire history, even with the ongoing labor stoppage,” he said on a call with analysts. “We see a strong basketball product pipeline from our vendors, such as Nike and adidas, and solid enthusiasm for basketball silhouettes by our customers. Basketball footwear has developed a huge lifestyle appeal which is not dependent on just the NBA.”

The firm also continues to expand its retail network in Europe, targeting new markets such as the Czech Republic and Poland.

“We look to possibly expand in countries like Turkey, where we’re very under-penetrated. And in other countries where we may have a stronger position [in high streets and freestanding stores], we are looking at really going to places that we’re not in, like malls,” said Hicks.

He added, “Right now, we’re comping positive across all of Europe. Greece obviously is a challenge, but we only have three stores there. And in our big five countries, including Italy, Germany, France and the UK, we continue to comp positive.”

In the third quarter, footwear sales gained mid-single digits, while apparel and accessories continued their run of double-digit gains, the firm said.

Within footwear, men’s and kid’s posted strong gains while the women’s business was flat. The growth in lightweight and technical running also offset the decline in toning sales.

Foot Locker handily topped estimates in the third quarter, thanks to strong comps in the high single digits.

For the period ended Oct. 29, the New York retailer earned a net income of $66 million, or 43 cents a share, a 27 percent increase over net income of $52 million, or 33 cents, last year. Revenue advanced 9 percent, to $1.39 billion this year, from $1.28 billion a year ago, on the back of a 7.4 percent comparable store sales increase.

Analysts were looking for EPS of 39 cents on revenue of $1.37 billion, as polled by Yahoo Finance, and the firm’s shares spiked nearly 6 percent in Friday morning trading. “It was a very good quarter,” said Kate McShane, analyst at Citi Investment Research. “A lot of it had to do with the running category that continues to do so well. Basketball is 25 or 30 percent of the overall business so it’s choppy but they have enough diversity going on that it’s not such a significant concern.”

Morningstar Inc. analyst Paul Swinand agreed, saying, “Investors need to remember there is a big fashion trend in basketball which is benefiting Foot Locker right now [and] in our experience basketball trends and releases tend to accelerate in the holiday season.”

At quarter’s end, Foot Locker had $698 million in cash and cash equivalents, and $136 million in long-term debt.

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