This Retailer Is the Key to the Growing Footwear Industry

A rising health consciousness in society has not only created opportunities for the food industry but also the footwear industry. Now people consider athletic shoes to be a necessity rather than a luxury. Therefore, athletic-footwear players such as Foot Locker (NYSE: FL  ) are enjoying the benefits.

Foot Locker has become very popular among customers and is witnessing great demand for its products. It reported fourth-quarter numbers that beat analysts' expectations, enabling its stock price to move north.

A great quarter
Revenue at Foot Locker grew 4.6% to $1.79 billion, driven by higher demand for products. Also, the addition of 84 new store outlets contributed to the increase. However, it was not only the new stores which added to the top line--the retailer also witnessed higher sales at its existing stores. Same-store sales for the quarter surged 5.3%.

Higher demand for Foot Locker's products, especially basketball products, boosted results. The company's focus on the children's segment and the expansion of shop-in-shop locations also fueled results. Also, it has been remodeling stores to make them more attractive to customers. A total of 320 stores were remodeled during fiscal year 2013. Adjusted earnings jumped 28% year over year to $0.82 per share, indicating the company managed its costs well.

Key advantage to be considered
One of the biggest advantages for Foot Locker has been its partnership with footwear manufacturer Nike (NYSE: NKE  ) . Nike has been performing well and is experiencing growing popularity. Nike's growth was evident when it posted second- quarter results wherein the top line jumped 8% and earnings rose 4%. The company's innovative products enable it to lure lots of customers.

Moreover, it continually strives to provide better offerings to make customers' lives easier. For example, the launch of Nike+ FuelBand and Flyknit technology proved to be quite successful. Also, the company's cost-management efforts led to a gross margin expansion of 140 basis points. Nike's stature in the footwear market has helped Foot Locker since the former's products comprise two-thirds of Foot Locker's total revenue.

Peer comparison
In addition to Foot Locker, industry peers are also doing well. The Finish Line (NASDAQ: FINL  )  is similarly making numerous efforts to grow. Its third-quarter sales grew by a whopping 23% as the company strengthened its digital business, which includes websites as well as mobile apps. Finish Line also entered into a partnership with Macy's to keep its products in the department store's locations. This will increase the footwear retailer's exposure to customers who would otherwise not visit its stores. However, this introduced additional costs to the company.

Also, Finish Line expanded its running-shoes segment by acquiring Running Spot. However, this move does not seem to be very interesting since demand for basketball products has been on the rise. On the other hand, Foot Locker has been concentrating on the growing basketball business.

Future plans
Foot Locker has some plans for the future that should help the company to grow further. Firstly, it plans to expand its footprint in Europe, where demand for its products is on the rise. Also, the company earmarked $220 million for capital expenditures this year which includes technological investments. The footwear retailer has been restructuring its stores and plans to continue to do so.

Moreover, Foot Locker will be focusing on its women's segment and the e-commerce business in the months to come. The online business has been a point of focus for most retailers since people find it easier to order products online and get products delivered at their doorstep.

My take
Foot Locker looks interesting because of its impressive numbers, as well as growing demand for Nike products. Moreover, its expansion strategies for Europe, the women's segment, and the online business should be fruitful. Also, store remodelings and technological investments will make the retailer more attractive. Since demand for athletic footwear is growing, this footwear company is worth a bet.

6 stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 09, 2014, at 3:52 PM, Hansen wrote:

    Foot Locker sells products manufactured by major sportswear companies like Adidas AG (ADDYY), Under Armour, Inc. (UA), and Nike, Inc. (NKE). And Nike alone accounts for 65% of the company’s product offerings http://bit.ly/1g471Lv

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2913908, ~/Articles/ArticleHandler.aspx, 11/27/2014 9:29:34 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement