Foot Locker Q2 Up

Stronger-than-expected comps helped buoy Foot Locker Inc. to beat the Street in the second quarter.

For the period ended July 28, the New York-based specialty athletic retailer earned a net income of $59 million, or 39 cents a share — a 59.5 percent rise from $37 million, or 24 cents, in the same period a year ago.

Revenues advanced 7.2 percent to $1.37 billion, from $1.28 billion, on the back of a comparable-store sales increase of 9.8 percent.

Analysts were expecting earnings per share of 33 cents on revenue of $1.35 billion.

Michael Binetti, analyst at UBS Investment Research, said it was “another quarter of strong execution [for the firm].”

Camilo Lyon, analyst at Canaccord Genuity, said, “Expectations for a solid quarter were high and Foot Locker delivered. The firm remains our top retail pick in our coverage as the company is executing at a high level, driving solid comp gains and delivering robust margin expansion.”

Positive results were driven by Nike’s lightweight and technical running products, the firm said. Domestic comps rose in the low teens in the second quarter, while Foot Locker Europe’s comp-store sales were essentially flat. The international divisions posted mid-single-digit comp gains, while the direct-to-customer segment advanced 18.1 percent.

Ken Hicks, chairman and CEO of Foot Locker, said more store changes are expected in the back half. The firm is now testing 11 stores for the Champs prototype, and has several Foot Locker test stores on tap for this winter into next spring.

“We intend to open three new concept stores for Lady Foot Locker before the holiday selling season. These stores will be merchandised significantly different than a Lady Foot Locker store with much more apparel, stronger coordination between shoes and apparel and more emphasis on performance. These stores will have a new nameplate over the door, which we will announce later in the quarter,” Hicks said on a conference call with analysts Friday.

Speaking on the macro situation, Hicks pointed to the pace of product innovation from key vendors such as Nike, Adidas, Canvas, Jordan, A6, New Balance, Mizuno and Under Armour as a reason to be optimistic.

“That said … there is always the potential for an impact on the U.S. economy that we will have to manage through, and the future direction of Europe’s economies — in the short run especially — is still highly uncertain. But our business remains solid in the U.S., Canada and Australia, and it seems to be picking up in Europe, with positive comps there in July and so far in August,” said Hicks. “We will continue to plan cautiously, but we believe we have the right product in the stores now for back-to-school, and the right product coming up for the holiday selling season.”

Foot Locker ended the period with cash and short-term investments of $820 million and long-term debt of $133 million.

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