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Why Foot Locker Stock Popped Today

By Steve Symington - Feb 28, 2020 at 5:50PM

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The footwear retailer ended 2019 on a strong note despite sales headwinds in the fourth quarter.

What happened

Even as the broader markets continued to slide, shares of Foot Locker (FL -2.65%) jumped more than 8% on Friday after the athletic footwear retailer announced better-than-expected fourth-quarter 2019 results.

That's not to say Foot Locker's headline numbers looked good at first glance. Quarterly revenue declined 2.2% year over year to $2.22 billion, translating to a modest 4% increase in adjusted (non-GAAP) earnings of $1.63 per share. 

So what

By comparison, however, most analysts were only looking for earnings of $1.58 per share, albeit on slightly higher revenue of $2.24 billion. 

Man in white shirt and black/white tie celebrating in front of a wooden arrow chart indicating gains.

Image source: Getty Images.

Foot Locker chairman and CEO Richard Johnson noted the company's "leading positions in key on-trend footwear styles" weren't quite enough to offset soft demand and high promotions in the key holiday seasons.

"We took actions during the quarter to manage slower moving items which pressured our gross margin rate more than expected," elaborated Foot Locker CFO Lauren Peters. "Importantly, our ongoing disciplined expense management enabled us to better align our variable expenses with the softer sales trends, while continuing to invest in our key strategic imperatives."

Now what

During the subsequent conference call, Foot Locker management offered an early look at their goals for the full fiscal-year 2020, including low single-digit comparable-sales growth (swinging from a 1.6% decline in Q4), and low- to mid-single-digit increases in earnings per share.

After coupling that encouraging outlook with Foot Locker's strong end to 2019, and with shares already nearly 50% in the year leading up to this report, it was hardly surprising to see this consumer discretionary stock rebounding in response today.

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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Stocks Mentioned

Foot Locker, Inc. Stock Quote
Foot Locker, Inc.
FL
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