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What happened
Shares of retailer Foot Locker, Inc. (FL 3.15%) jumped 10.1% in August, according to data provided by S&P Global Market Intelligence, after the company reported better-than-expected earnings.
So what
Second-quarter revenue jumped 5% to $1.78 billion and net income rose 7% to $127 million, or $0.94 per share. Results topped the $1.76 billion and $0.90 per share in earnings that analysts expected. That was enough to get investors excited.
The big takeaway is that customers aren't leaving Foot Locker's bricks-and-mortar stores for online retailers. Management said that basketball, running, classic footwear, and apparel all had comparable sales increases in the quarter. If that trend continues, it would be great news for the company.
Now what
As far as retailers go, Foot Locker finds itself in a strange position. Online sales of shoes are picking up and the company is, ironically, competing with the brands it sells, which are bringing products directly to consumers. It's holding off those threats for now, and that's why shares are recovering. Watch top-line results going forward, because if sales start falling the company could face the same decline other retailers did, which is the big risk going forward.
