Foot Locker’s Stock Climbs on Solid Q1, Street Beat

Foot Locker Inc. is seeing its share price climb today after the New York-based athletic footwear and apparel retailer finished its first quarter with gains in profits, sales and comparable-store sales. Management said the company has “hit the ground running in 2015” and as such produced its “most profitable quarter” to date. During the conference call, though, management pointed to some concerns over Champs Sports—which posted a low single-digit comparable sales decline.

Net Income: The company said its net income for the quarter ended, May 2, 2015, was $184 million, up 17 percent from the same year-ago quarter’s net income of $162 million.

EPS: Earnings per diluted share rose to $1.29 per share, from last year’s same-quarter EPS of $1.10.

Net Revenue: Total first quarter sales increased 2.6 percent, to $1.92 billion, compared with sales of $1.87 billion for the corresponding prior-year period.

Hit, Miss or Beat: Foot Locker’s performance beat Wall Street’s estimates for both revenues and EPS. Analysts polled by Yahoo Finance had predicted sales of $1.91 billion, a slight beat for the company, and EPS of $1.23, which the company surpassed substantially.

Executive Insights: “We have hit the ground running in 2015, producing the most profitable quarter in our history,” said Richard Johnson, Foot Locker’s president and CEO, in a release. “We are focused on executing the updated strategic priorities that we described in our investor meeting in March, and the results in the first quarter demonstrate that we remain on the right track, with strong performances across our channels, geographies, banners, and categories. Our core business improved and we made progress on each of our growth pillars, a team accomplishment of which we are all very proud.”

On Champs: “Champs Sports posted a low single-digit comparable sales decline, with strength in footwear not quite enough to offset an ongoing decline in the apparel sales … It remains the highly profitable chain with significant opportunities to get back to positive sales growth.” Lauren Peters, EVP & CFO, May 22 conference call.

Analyst Insights: “We were impressed by Foot Locker’s outsized 1Q [same-store sales] beat and continuing strong quarter-to-date trends—particularly amid a number of top-line misses across softlines retail lately.” – UBS Investment Bank analyst Michael Binetti, May 22 note.

“Footwear continued to be the category leader with [low-double-digit] growth. To no surprise, basketball was once again strong, but we note that growth in running has either matched or outpaced that of basketball over the last four quarters. Recall this is being driven by strong trends in fashion running (i.e., Roshe Run and ZX Flux) and should quell concerns that the company is too skewed to just one category.” –Christopher Svezia, Susquehanna Financial analyst, May 22 note.

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