by Ian Harvey
February 29, 2020
Foot Locker Inc continued its downward spiral all week; reported earnings Friday morning and stock fell more before recovering to finish trading at $36.25 (+2.69) up 8.02%.
However, “Earnings Prediction Members,” before recovery of the stock, were up 262% using an options put trade.
Foot Locker posted stronger-than-expected fourth quarter earnings Friday but weak holiday demand and tough competition in sports clothing markets held back same-store sales growth.
FL beat the analyst consensus estimate of $1.60 by 1.87% at $1.63. This is a 4.49% increase over earnings of $1.56 per share from the same period last year.
The company reported quarterly sales of $2.221 billion, which missed the analyst consensus estimate of $2.25 billion by 1.29%. This is a 2.24% decrease over sales of $2.272 billion the same period last year.
Foot Locker Inc reported fourth-quarter comparable-store sales decreased 1.6%.
Foot Locker Inc results displayed the second straight quarter of an earnings beat but the fourth consecutive revenue miss.
"While we had leading positions in key on-trend footwear styles, this was not enough to offset softer than expected demand during the compressed holiday season, a very promotional marketplace for apparel, and tougher launch comparisons," said Richard Johnson, CEO of Foot Locker.
During the quarter, Foot Locker opened 32 new outlets, remodeled or relocated 66 stores, and shuttered 63. As of Feb 1, 2020, the company operated 3,129 outlets across 27 countries in North America, Europe, Asia, Australia and New Zealand. Apart from these, there are 130 franchised Foot Locker stores in the Middle East. Germany has nine franchised Runners Point stores.
Foot Locker Inc shares were trading up 1.6% at $34.10 in Friday’s pre-market session. By the end of the normal trading session shares were up 8.02% to settle at $36.25 (+2.69). Shares traded as high as $37.20 during the day.
Foot Locker Inc shares have lost about 13.9% since the beginning of the year versus the S&P 500's decline of -7.8%. The stock has a 52-week high of $65.04 and a 52-week low of $31.23.
The Trade at the Time.....we wrote.....
“Foot Locker, Inc. (NYSE:FL), a retailer of shoes and apparel, is confirmed to report earnings will report earnings before the market opens.
This shoe store is expected to post quarterly earnings of $1.61 per share in its upcoming report, which represents a year-over-year change of +3.2%.
Revenues are expected to be $2.26 billion, down 0.6% from the year-ago quarter.
For the last reported quarter, it was expected that Foot Locker would post earnings of $1.07 per share when it actually produced earnings of $1.13, delivering a surprise of +5.61%.
Over the last four quarters, the company has beaten consensus EPS estimates two times.
The world has gone sneaker crazy, but one would never know it looking at traditional retailers like Foot Locker. Sales are up a meager 3.6% over the last trailing three-year stretch, and shares have taken a precipitous 42% fall over that same time frame.
The problem, as it often is in the retail space these days, is e-commerce. The internet is democratizing retail, and shoe manufacturers have been taking advantage by building their own direct-to-consumer selling businesses online. When consumers can go directly to the source for the goods they want that leaves middlemen like Foot Locker out of the mix. Thus, shares are currently going for a shocking 7.6 times trailing-12-month free cash flow generation.”
Members bought the FL MAR 20 2020 37.500 PUT at approximately $1.65 on Monday.
YOU NEED TO BE IN TO PROFIT!
Looking into the 2021 fiscal year, Foot Locker Inc said it sees same-store sales rising by a low single-digit percentage rate, with earnings increasing in a low to mid-single digit range.
The company’s board of directors approved a $275 million capital expenditure plan for fiscal 2020, targeting to deliver organic growth across its business. Planned investment for next fiscal signifies higher spending toward community-based power stores in markets worldwide, apart from investments to enhance core stores. Through this spending, the company will continue focusing on digital advancement and enhancement of its U.S. supply chain.
Looking forward, the retailer believes that it's built a good foundation for better performance, especially with stronger inventory management and cost controls in place.
Some analysts fear that spending on consumer discretionary items might fall if the coronavirus outbreak results in workplace shutdowns. For now, though, Foot Locker Inc seems to be holding up fairly well in a tough retail environment.
Will We Look At Another Options Trade On Foot Locker Inc?
How High Can Foot Locker Inc Share Price Go?
Will Foot Locker Inc Buck The Virus Trend?
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An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!