What happened

Shares of Foot Locker, Inc. (NYSE:FL) were taking a step down this year, thanks to the broad retail sell-off and a weak first-quarter earnings report. According to data from S&P Global Market Intelligence, the stock has given up 35% as of July 25. 

Two young men playing basketball outside

Image source: Getty Images.

As the following chart shows, the stock was up as of May but then began sliding on industry weakness and on a disappointing earnings report. Shares have continued to fall since then.

FL Chart

FL data by YCharts

So what 

Foot Locker shares jumped when the company reported its fourth-quarter earnings in February. The retailer showed a 5% increase in comparable sales and adjusted earnings per share, from $1.16 to $1.37, beating estimates of $1.32. However, the company noted on the call that fiscal 2017 had gotten off to a slow start.

That proved to be true, as the company warned on first-quarter performance in April and then posted disappointing numbers when it issued the full report in May. Foot Locker shares were already sliding on general weakness but plunged 17% when it reported earnings on May 19. 

Earnings per share slipped from $1.39 to $1.36, missing estimates of $1.38, and comparable sales increased just 0.5%, which the company blamed on a delay in tax refunds. The company also issued a weak guidance for the current quarter, calling for low-single-digit comparable sales growth.

From there, the stock continued to fall, dropping in June on news that Nike would sell directly on Amazon.com. That was interpreted as a negative sign for Foot Locker, which has a close relationship with Nike.

Now what

Foot Locker is still calling for comparable sales growth in the mid-single digits and double-digit earnings-per-share growth in the second half of the year. The company is in a stronger position than much of the retail sector as big sneaker releases tend to drive foot traffic, and it was able to generate a comparable sales increase even during a weak quarter. However, the stock is as cheap as any other battered retailer, trading at a P/E of less than 10. If management can execute on guidance for the second half, the stock should recover some of its losses.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.