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Why Foot Locker Stock Gained 20% in November

By Demitri Kalogeropoulos – Dec 4, 2018 at 2:14PM

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Investors cheered the retailer's improving operating trends heading into the holiday season.

What happened

Foot Locker (FL 0.66%) shareholders beat the market last month, as their stock gained 20% compared to a 1.8% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The increase put shares back in solidly positive territory for the year, despite having been down by as much as 12% in early spring.

A jogger laces up his shoes.

Image source: Getty Images.

So what

November's rally was sparked by third-quarter earnings results that showed gathering momentum in Foot Locker's retailing business. Comparable-store sales rose 2.9% to mark the second straight quarter of improvement for this key growth metric. Profitability increased, too, which management said was due to a boost in full-price selling. The results, taken with its positive second-quarter announcement, suggest its rebound is in full swing.

Now what

Foot Locker must execute well during the competitive holiday season, when even minor stumbles can have an outsize impact on full-year earnings. However, trends through late October gave management confidence to increase their outlook so that comps are expected to rise in the low-to-mid single digits while gross profit margin expands by more than a full percentage point. Those gains should translate into modest sales growth for the year and a double-digit jump in earnings per share.

Demitrios Kalogeropoulos 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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