How Foot Locker Plans to Jump Higher

Tomorrow, Foot Locker (NYSE: FL  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

With its traditional business model of selling name-brand athletic apparel and shoes from a variety of manufacturers, Foot Locker looks like an old-style retailer compared to the direct-to-retail brand-name stores that have popped up in recent years. Yet, despite the challenges of increased competition, the retailer hasn't shied away from making moves to boost its own future prospects. Let's take an early look at what's been happening with Foot Locker over the past quarter, and what we're likely to see in its quarterly report.

Stats on Foot Locker

Analyst EPS Estimate

$0.88

Change From Year-Ago EPS

6%

Revenue Estimate

$1.63 billion

Change From Year-Ago Revenue

3.5%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can Foot Locker's earnings run faster this quarter?
Analysts have recently cut back their views on Foot Locker's earnings prospects, reducing their earnings-per-share estimates for the April quarter by $0.02, and cutting $0.03 per share from their consensus for the current fiscal year. The stock, though, has managed to post modest gains of almost 6% since mid-February.

Foot Locker has been riding a wave of strong growth lately, with its previous quarterly report showing earnings gains of 28% on 14% higher revenue, and same-store sales gains of nearly 8%. Even though the stock dropped on the news because expectations were even higher, the retailer's performance is impressive given the amount of competition Foot Locker faces. In particular, Nike's retail stores put the shoe giant in the awkward position of competing with Foot Locker and other traditional retailers, and that's a tough line for both Nike and Foot Locker to walk.

One key to Foot Locker's success has been its emphasis on basketball shoes, which should produce even better results this quarter as the NBA season entered the playoffs. By contrast, Finish Line has struggled to find its own niche, looking to capture more of the running-shoe market, but still largely missing out on other key segments.

Moreover, Foot Locker has made moves to expand its geographical breadth. Earlier this month, it announced the purchase of Germany's Runners Point for $94 million. The purchase might seem questionable, given Europe's weakness, but the low price tag suggests that Foot Locker got a bargain in the deal, and when Europe recovers, Runners Point could really pay off for the company.

In Foot Locker's quarterly report, watch for CEO Ken Hicks to discuss his long-term vision for Europe and the rest of the company. Given the transformative efforts that Hicks has made at the company, investors should feel confident about Foot Locker's prospects going forward.

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