Foot Locker Inc. today reported first quarter 2016 earnings that management said were the best in the company’s history. While the results were roughly in line with forecasts, the firm’s stock slid in early morning trading as investors were likely hoping for a Q1 beat from the athletic retail giant.
Foot Locker said its Q1 net income increased 4 percent, to $191 million, or $1.39 per diluted share, from $184 million, or $1.29 per diluted share in the comparable period. Market watchers had predicted that the firm would post diluted earnings per share of $1.39.
As analysts had also expected, revenues advanced 4 percent, to $2 billion, from $1.9 billion in the prior year’s same period. Comparable-store sales increased 2.9 percent in the quarter, missing forecasts for comp gains of around 4 percent.
Foot Locker president and CEO Dick Johnson — who was also named chairman of the company’s board this week — said softer-than-expected basketball-category sales were to blame for comps falling below the company’s guidance.
“The basketball business, like all of our other categories, writes on newness and innovation,” Johnson said. “Where that was apparent, our basketball business remains strong. The Jordan Brand continues to innovate and produce excellent results with the sportswear side of that brand [seeing] the biggest dollar gains.”
Johnson said the casual portion of basketball, led by Adidas Superstars and Nike Air Force Ones, was also strong, while signature basketball shoes saw the biggest decline. “Although we saw important elements of excitement, the Curry shoes from Under Armour and the Irving shoes from Nike both posted big gains,” Johnson added.
The CEO also noted that lifestyle running footwear was an “especially good business” in Q1.
EVP and CFO Lauren Peters said the company’s strongest division in the quarter was Foot Locker Canada, which saw comp gains in the high teens. Despite an overall softness in the basketball business, the results in the company’s Canada stores were actually boosted by double-digit sales gains in basketball footwear.
By division, Peters said Champs Sports posted a mid-single digit comp increase, while Foot Locker, Kids Foot Locker, Lady Foot Locker and Six:02 were each up low-single digits. Footaction posted a comp loss in the high single digits, while Eastbay declined mid-single digits.
Regarding the current quarter, Peters said comp sales are down month to date but she expects an uptick with this weekend’s Jordan releases. Meanwhile, temporary store closures of two of its top-performing, New York-based locations — the 34th Street store below the company’s former headquarters and the Foot Locker store in Times Square — will also weigh on Q2 sales, according to Peters.
At press time, Foot Locker’s share price had slipped 7 percent, but analysts generally remain positive on the firm.
“While Foot Locker’s Q1 comps came in slightly lower than expected, we think expectations were generally low coming into the report based on broader negative sentiment across U.S.,” Citi Research analyst Kate McShane said in a note today. “Meanwhile, Foot Locker’s in-line EPS results and reiterated guidance should be a net positive in this environment.”