Foot Locker's (FL) Q1 Earnings Beat Mark, Revenues Rise Y/Y

Foot Locker, Inc. FL posted mixed first-quarter fiscal 2022 results, wherein the top line missed the Zacks Consensus Estimate while the bottom line surpassed the same. FL delivered the eighth straight earnings beat in the reported quarter. Also, the top line grew on a year-over-year basis.

Foot Locker’s FLX membership program and omni-channel capabilities appear encouraging. We note that FL is on track to accomplish $1-billion sales by 2024 or see a 20% CAGR from the anticipated $650 million sales this year. Higher same-store sales and new units with the potential to more than double the present base of around 100 stores will drive sales.
 
Over the past six months, shares of Foot Locker have declined 22% compared with the industry’s 15.9% decrease.

Q1 Metrics

The athletic shoes and apparel retailer posted adjusted earnings of $1.60 per share, which surpassed the Zacks Consensus Estimate of $1.47. The bottom line decreased 18.4% from adjusted earnings of $1.96 per share recorded in the prior-year quarter.

Total sales of $2,175 million inched up 1% year over year but came below the consensus estimate of $2,203 million. Excluding the foreign-currency fluctuation impact, total sales grew 3%. Digital penetration was 18.3% compared with 24.8% in fiscal 2021.

Comparable-store sales (comps) slipped 1.9% in the quarter, with apparel majorly outpacing footwear. Comps in Foot Locker’s stores grew 7.9%, with store traffic up about 25%, while conversion was down 10% from the prior-year figure.

An Insight Into Margins

Foot Locker's gross-margin rate in the reported quarter dropped 80 basis points (bps) from the prior-year quarter’s tally. Elevated supply-chain costs and slightly increased markdowns compared to the historically-low levels caused a margin decline.

The SG&A rate was 21.3%, deleveraging nearly 140 bps due to increased labor and technology spend.

Store Update

During the fiscal first quarter, Foot Locker opened 24 stores, and remodeled or relocated 23 outlets. FL closed 67 stores during the aforementioned period.

As of Apr 30, 2022, Foot Locker operated 2,815 stores across 28 countries in North America, Europe, Asia, Australia and New Zealand.  Also, FL had 148 franchised stores operating in the Middle East and Asia.

For fiscal 2022, management expects to open roughly 100 stores, including 40 community and power outlets, 27 WSS stores and nine atmos stores, while shutting down nearly 190 stores.

Other Financial Details

Foot Locker ended the fiscal first quarter with cash and cash equivalents of $551 million. Long-term debt and obligations under finance leases amounted to $450 million and shareholders’ equity summed $3,215 million. As of Apr 30, 2022, merchandise inventories were $1,401 million, up 37.2% from the year-earlier quarter’s end-level.

During the first quarter of fiscal 2022, Foot Locker repurchased 2.7 million shares for $89 million and paid out quarterly dividends of $38 million.

Outlook

For fiscal 2022, management expects the upper end of sales to decline 4-6% and the higher end of comps to decrease 8-10%. Gross margin is anticipated in the range of 30.6-30.8% and the SG&A rate is forecast to be 20.7-20.9%. Management expects supply-chain costs to remain a drag on the margins.

Foot Locker envisions adjusted earnings per share of $4.25-$4.60 for the full fiscal. Management predicts capEx at $275 million for fiscal 2022 due to store openings as well as technology and omnichannel investments.

Top 3 Retail Stocks for You

We highlighted three better-ranked stocks, namely Tecnoglass TGLS, Boot Barn Holdings BOOT and Fastenal FAST.

Tecnoglass engages in manufacturing, and selling architectural glass and windows plus aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). Shares of TGLS have jumped 12.9% in the past year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 21.3% and 28.7%, respectively, from the corresponding year-ago period's reported figures. TGLS has a trailing four-quarter earnings surprise of 28.3%, on average.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently flaunts a Zacks Rank #1. BOOT has a trailing four-quarter earnings surprise of 25.2%, on average. The stock has rallied 19.8% in the past year.
 
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and earnings per share suggests growth of 17% and 4.4%, respectively, from the corresponding year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Fastenal, a national wholesale distributor of industrial and construction supplies, currently has a Zacks Rank #2 (Buy). FAST has a trailing four-quarter earnings surprise of 5%, on average. The stock has risen 0.6% in the past year.

The Zacks Consensus Estimate for Fastenal's current financial-year sales and earnings per share suggests growth of 15.4% and 16.3%, respectively, from the corresponding year-ago tallies. FAST has an expected EPS growth rate of 9% for three-five years.

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Fastenal Company (FAST) : Free Stock Analysis Report
 
Foot Locker, Inc. (FL) : Free Stock Analysis Report
 
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