Looking for a Fit at Foot Locker

Foot Locker (NYSE:FL) provided nothing stellar in its third-quarter earnings report, at least as far as the numbers are concerned.

The company made $0.42 in earnings per share, which is unchanged from the year-ago quarter, and same-store sales fell 0.3%. Management also raised its earnings guidance for the year to $1.58-$1.65 per share.

Although sales and earnings are essentially flat over the last couple years, Foot Locker's cash flow remains strong, and the company is rewarding shareholders with a 39% dividend increase. The new annualized rate of $0.50 provides a nice 2.1% yield at yesterday's closing price.

However, the company appears willing to continue experimenting. In the spring, it will open 30 "Footquarters" stores that will sell valued-priced family footwear. Plus, this month, the first "Champs Sports Just Hats" store will open in Miami. While these new retail concepts may fill some niches Foot Locker is currently missing, is another chain of stores what the company needs right now?

After all, opening new stores is not cheap, and neither is the rent in high-traffic shopping malls. When I notice a Foot Locker, Lady Foot Locker, Kids Foot Locker, and perhaps a Champs or FootAction all in the same mall, I'm curious if all that retail space couldn't be more productive if it were consolidated into just one or two larger stores.

Meanwhile, if Foot Locker's results were unimpressive, Finish Line's (NASDAQ:FINL) latest quarterly results stunk like an old pair of running shoes. Same-store sales dropped 6.6%, while net income fell 47%. Both companies have been the subjects of buyout rumors, although so far nothing substantial has come to light.

Foot Locker maintains a high-quality brand and seems somewhat resistant to Wal-Mart's (NYSE:WMT) pricing pressure, but for now the company and the stock seem out of breath. Apparently the CAPS community sees some value in these shares, with 15 "outperform" picks versus a single "underperform" rating. While I agree, I also want to see some measure of growth before trying on this stock. Of course, if you have thoughts to share, just stroll on over to the Foot Locker CAPS page to contribute your own commentary.

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Wal-Mart is Motley Fool Inside Value recommendation.

Fool contributor Jason Ramage holds no financial interest in the companies mentioned here. His CAPS rating is currently 5,870 out of 13,207. The Fool has a disclosure policy.