Foot Locker’s Q4 Beats the Street

Analysts are upbeat on Foot Locker Inc. ahead of its planned investor day next Tuesday.

Kate McShane, analyst at Citi Investment Research, said the retail chain’s month-to-date comparable-store sales “are very encouraging in light of the numbers that they were up against. It bodes well for comp strength in the whole first quarter.”

She added that opportunities for the firm include improving its inventory turn to catch up with demand. “It bodes well, especially for gross margins, because it makes way for them to have more fresh product,” she said.

Michael Binetti, analyst at UBS Investment Research, agreed: “We were particularly impressed with revenue growth, despite inventories being up only 1 percent.”

He also expects the company will announce on Tuesday significantly increased sales-per-square-foot targets of about $450 — up from $400 in March 2010 — and could guide margins up to 10 percent from the current 8 percent.

In a conference call with analysts, Foot Locker EVP and CEO Lauren Peters said, “One of our key goals for 2012 is to produce double-digit percentage profit growth for the full year and for each individual quarter.”

She added, “We intend to build on the solid foundation of improvements we’ve made in merchandize flow, which should keep markdown rates low and margins up. As always, we’ll control our expenses carefully.”

For the period ended Jan. 28, the New York-based retailer earned a net income of $81 million, or 53 cents a share, a 42 percent increase from $57 million, or 36 cents, in the same period a year ago. 

Revenue advanced 7.9 percent to $1.5 billion, while gross margin also improved 110 basis points to 32 percent.

Analysts were expecting earnings per share of 51 cents on revenue of $1.49 billion, as polled by Yahoo Finance. 

Within footwear, the men’s and kids’ segments posted high single-digit gains, while the women’s business was flat, the firm said. There were healthy increases across the retailer’s major categories of basketball, running and casual.

“Even our boot business posted a gain overall, despite warmer-than-average temperatures in many of our markets,” said Peters.

Ken Hicks, Foot Locker’s chairman and CEO, told analysts, “Our core vendors, including Nike, Adidas and Reebok, are doing well. In addition, our performance running vendors such as New Balance, Asics, Brooks and Saucony are bringing excitement to the running category. We’ve also grown our offering of casual footwear.”

For the full year, net income was $278 million, or $1.80 a share, compared with $169 million, or $1.07, in 2010. Revenue increased 11.4 percent to $5.62 billion.

Foot Locker ended the period with cash and cash equivalents totaling $851 million, and long-term debt of $135 million.

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