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Why Foot Locker Stock Popped Today

By Steve Symington – Nov 21, 2018 at 12:04PM

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The footwear retailer delivered a strong third quarter and encouraging forward guidance. Here's what investors need to know.

What happened

Shares of Foot Locker (FL -0.32%) were up 15.6% as of 11:20 a.m. EST Wednesday after the footwear retailer announced stronger-than-expected third-quarter 2018 results.

More specifically, Foot Locker's quarterly revenue declined 0.5% year over year, to $1.860 billion, which translated to 9% growth in adjusted (non-GAAP) earnings to $0.95 per share. Most analysts would have settled for adjusted earnings of $0.92 per share on revenue of $1.846 billion.

Front of Foot Locker retail store

IMAGE SOURCE: FOOT LOCKER.

So what

Foot Locker's revenue included a healthy 2.9% increase in comparable-store sales, and sales would have a climbed 0.4% had it not been for the negative impact of foreign currency exchange. This top-line result was further reduced by roughly $60 million from a shift in timing for the fiscal calendar as compared to the same year-ago period.

"We're encouraged by the second consecutive quarter of comparable sales growth, more full-price selling, and greater than expected gross margin expansion," stated Foot Locker CFO Lauren Peters. "We believe we are well positioned to produce even stronger results in the all-important holiday selling season and the fourth quarter overall."

Now what

Foot Locker management didn't provide specific forward financial guidance during the subsequent conference call with analysts. But they did say the company expects "solid double-digit" growth in earnings per share (EPS) for the fourth quarter, which should leave them on track to meet their previous full-year guidance for a low single-digit comparable sales increase and double-digit EPS growth. By comparison, most analysts were anticipating a more modest 9% increase to the bottom line.

In the end, this was as good a quarter as any Foot Locker investor could have asked. And with shares trading down slightly year to date leading up to this report, the stock is responding in kind.

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

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