Market Watch: B-Ball, Kids’ to Drive Foot Locker… All Eyes on Target

The Week Ahead

Monday, May 19:
Urban Outfitters Inc. Q1 results

Tuesday, May 20:
Dick’s Sporting Goods Inc. Q1 results
The TJX Companies Inc. Q1 results

Wednesday, May 21:
Target Corp. Q1 results
L Brands Inc. Q1 results
American Eagle Outfitters Inc. Q1 results

Thursday, May 22:
Shoe Carnival Inc. Q1 results
The Gap Inc. Q1 results
Aeropostale Inc. Q1 results
Skechers USA Inc. annual stockholders meeting
U.S. initial weekly jobless claims
U.S. continuing weekly jobless claims

Friday, May 23:
Foot Locker Inc. Q1 results
Hibbett Sports Inc. Q1 results

Stock Watch

Improved international sales trends and the robust performance of Foot Locker Inc.’s basketball and children’s businesses are expected to fuel the company’s first-quarter results, slated to be reported on Friday.

Analysts’ consensus forecasts for the period point to same-store sales growth of 6.3 percent and diluted earnings per share of $1.06.

“Based on our checks and industry data, we are confident that the first quarter and current trends remain robust,” Sam Poser, an analyst at Sterne Agee, wrote in a note to clients.

“Improvements in international sales trends, the recently acquired Runners Point Group business, new allocation systems, store remodels and strong vendor relationships position both Foot Locker and its stock well for long-term growth,” he added, noting that the company should beat consensus forecasts, guiding to EPS of $1.11 for the period.

Michael Binetti, an analyst at UBS, said he will look for an update on Foot Locker’s top-line strategies, such as commentary about the state of its women’s business and new Nike and Footaction shop-in-shops.

“We still believe Foot Locker can easily deliver upside to our more than 6 percent same-store sales estimate, based on ongoing strong U.S. basketball sales, accelerating U.S. reimaging lifts, Nike’s price increases, accelerating Europe trends [leading into the] World Cup this summer and improving productivity from the Runners Point Group, apparel and women’s businesses,” he said.

Binetti added that a key priority will be the use of Foot Locker’s cash — such as another potential acquisition — amid investor concerns about the possible slowing of basketball trends in 2014.

Shoe Carnival Inc. is set to report its first-quarter earnings on Thursday and provide an update on its sluggish market segment.

“While Nike and Skechers sales accelerated in April in the family footwear channel, overall business remains difficult in that channel,” Poser wrote in a note to clients.

“Kids’ athletic is underpenetrated in the family footwear channel, as [that category] does not offer the highly sought-after products, [such as] Jordan. We continue to be cautious with regard to Brown Shoe Co., Famous Footwear and Shoe Carnival,” he added.

According to analysts polled by Yahoo Finance, Shoe Carnival is expected to post EPS of 49 cents on revenue of $238.3 million.

Target Corp., which is in a state of flux following the appointment of interim CEO John Mulligan, will be in the spotlight this week. Market watchers are looking for information about the estimated future expenses related to the recent data breach, as well as color on U.S. consumer trends.

“In a nutshell, shares of Target remain in purgatory,” said Sterne Agee analyst Charles Grom. “To this point, with multiple uncertainties — from the future management team structure to its commitment to Canada, and most importantly its strategy to revitalize traffic [and] regain its relevancy with the U.S. consumer — we find the stock almost uninvestable right now.”

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