Can Foot Locker (NYSE:FL) run away from its recent lows following Friday’s second quarter statement?
Initially things were going pretty well for the retailer. After chugging along around the $70 for January and much of February the stock burst back towards $77.50 by early March, only a couple of dollars away from the all-time high struck in December 2016.
That rise was thanks to a solid fourth quarter report on February 24th. There Foot Locker revealed a 5.3% rise in revenue to $2.11 billion alongside earnings of $1.37 per share, a decent chunk higher than the $1.32 forecast. Like-for-likes were also healthy, with comparable sales surging 5% against the 4.6% increase forecast.
Though Foot Locker had begun to tail off across March and April, its sales update for the latter month – CEO Richard Johnson pointed to a ‘strong Easter selling period’ – helped reignite the stock, leading it to tickle $77.50 by the start of May. Yet it was here where Foot Locker lost its way.
In week before its May 19th first quarter report Foot Locker shed around 8% in value, only to plunge a whopping 16.5% on the day of the actual release. That’s because every major metric fell short of estimates: earnings per share came in at $1.36 against the $1.38 forecast; at $2 billion revenue was down on the $2.02 billion excepted; and like-for-like sales rose a measly 0.5%, far lower than the 1.5% growth anticipated. The company blamed a strong dollar and delayed tax refunds leaving the US consumer with less cash for the multiple misses, comments that did nothing to alleviate investors’ anger.
The stock kept falling as spring turned into summer, eventually culminating in a 39 month nadir of $44.66 in July. Foot Locker Inc now sits at a current trading price of $.. (Spreadex, 15/08/2017), the company somewhat rescued by a positive note from Morgan Stanley (NYSE:MS), which stated it believes the retailer can ‘withstand the challenge from Amazon’.
Given that the dollar has tanked since Foot Locker’s last update – and that consumers should assumedly now have their tax refunds – investors will expect to see an improvement in Q2. Analysts are estimating a slight 1.7% rise in revenue to $1.81 billion, but with a 3% fall in earnings to 91 cents per share.
Foot Locker Inc has a consensus rating of ‘Buy’ alongside an average target price of $71.99.