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Why Foot Locker Stock Jumped Today

By Joe Tenebruso – Aug 20, 2021 at 2:54PM

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A sharp rebound in profits from pandemic lows has investors excited.

What happened

Shares of Foot Locker (FL 2.67%) surged on Friday after the sportswear and footwear retailer reported surprisingly strong second-quarter results. 

As of 2:30 p.m. EDT, Foot Locker's stock price was up more than 8%.

So what

A 6.9% rise in comparable-store sales helped drive Foot Locker's revenue up 9.5% year over year to $2.3 billion. The gains were fueled by robust sales of women's and kids' footwear, apparel, and accessories.

"Our strong performance this quarter reflects the health of our category, the deep engagement we have with our customers, and the strategic nature of our relationships with our vendor partners," CEO Richard Johnson said in a press release.

People shopping in a sneaker store.

Image source: Getty Images.

As people returned to stores as the economy reopened, there was less need for Foot Locker to rely on promotional discounts to entice shoppers to spend. That helped the company's gross margin improve by 9.2 percentage points to 35.1%.

All told, Foot Locker's adjusted net income soared 211% to $233 million, or $2.21 per share. That was well above Wall Street's forecast for adjusted earnings of $1.01 per share. 

Now what

Foot Locker's improved profitability is allowing the company to return cash to investors via share repurchases and a rising dividend income stream. "The 50% increase to our quarterly dividend rate that we announced earlier this week reflects our board's confidence in our business and financial strength," Johnson said.

Joe Tenebruso 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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