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Foot Locker Stock Drops 5% Despite Positive Comps, Earnings Beat

Foot Locker stock dropped nearly 5 percent on Friday morning after the athletic footwear retailer released its third-quarter earnings, marking a loss of 29 percent in stock value since the beginning of 2019.

In a Nutshell: Despite an earnings beat and healthy same-store sales, Foot Locker will head into Q4 hoping for a better outcome.

Foot Locker opened 11 new stores in the third quarter and closed 25 locations as its merchandise inventory of $1.304 billion remained flat overall in Q3. Margins increased by 50 basis points compared to the year prior, up to 32.1 percent from 31.6 percent. Selling, general and administrative expenses also fell slightly as a percentage of sales to 21.3 percent from 21.4 percent in the comparable period last year.

“The strong results we delivered in the quarter reflect our work to drive the top line, while continuing to strengthen our operational execution, as reflected in our improved gross margin, SG&A, and inventory productivity,” Lauren Peters, the executive vice president and chief financial officer of Foot Locker, said. “As we enter the all-important holiday selling season, we will remain focused on execution to continue to position us to achieve our long-term financial objectives.”

In November, Nike also announced that it would be pulling its products from Amazon in an effort to align itself with more premium partners, including Foot Locker.

Sales: Revenue was up 3.9 percent year over year in the third quarter as Foot Locker registered $1.932 billion in sales, compared to $1.860 billion in the same quarter last year. Wall Street analysts expected sales of $1.94 billion in the third quarter.

Same-store sales continue to be a bright spot for Foot Locker as it refines its fleet of 3,160 stores throughout Asia, Australia, New Zealand and North America. In the third quarter, comparable-store sales rose 5.7 percent for the footwear retailer.

Earnings: Wall Street set earnings-per-share expectations of $1.07, which Foot Locker beat with $1.16 EPS, powered by net income of $125 million, compared to $130 million in the prior-year quarter.

CEOs Take: Foot Locker chairman and CEO Richard Johnson said the quarter was built on stronger relationships with both consumers and vendors. Johnson added that Foot Locker was working to toe the line between being relevant to youth culture and driving sales and earnings growth.

“We are pleased with our performance in the quarter, which reflects the success of our strategic focus on building even deeper connections with our customers and further strengthening relationships with our vendors,” Johnson said. “Across the company, we are making great strides in implementing our four strategic imperatives, which are designed to ensure we are best positioned to compete in the retail marketplace by inspiring and empowering youth culture while also strengthening our bottom line and driving value for our shareholders.”

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