On Thursday, Seaport Global Securities maintained a Neutral rating on Foot Locker (NYSE:FL) following the company's second-quarter financial performance. The sportswear and footwear retailer reported a slight beat in sales, EBIT, and EPS for the second quarter of 2024, with growth attributed to strong Foot Locker comparable store sales in North America and the EMEA region.
The company observed improving trends over the quarter, including a positive start to the back-to-school season. The return to positive sales growth was further supported by a less negative comparison with previous Champs Sports performance.
Despite exceeding its gross margin (GM) plan for the second quarter, Foot Locker is adjusting its GM forecast for the full fiscal year 2024 downward due to increased promotional activities in its international business and its recently acquired WSS stores.
However, this reduction in GM guidance is expected to be balanced by lower-than-anticipated selling, general, and administrative (SG&A) costs, leaving the company's earnings per share (EPS) outlook for the fiscal year unchanged. During the earnings call, Foot Locker guided the second half of 2024, indicating a third-quarter EPS that is projected to fall significantly below the consensus.
The company also anticipates a substantial increase in EPS for the fourth quarter, expecting it to more than double, a target that Foot Locker has achieved in the past but did not reach last year.
Foot Locker's positive performance in the second quarter was boosted by a successful back-to-school period, and the company is expected to continue this trend into the third quarter with ongoing momentum into August. While there are possibilities for another strong quarter in the fourth quarter, the comparison will be more challenging, and it remains uncertain whether the current momentum will extend into the holiday season.
In other recent news, Foot Locker has reported significant Q2 2024 financial results and strategic changes. The company posted a 2.6% rise in comparable store sales and a gross margin expansion to 27.6%.
Despite these positive figures, Foot Locker is undergoing strategic changes, including winding down operations in South Korea and some European countries and relocating its headquarters to St. Petersburg, Florida.
Telsey Advisory Group has adjusted its outlook for Foot Locker, increasing the stock's price target to $30.00 from $27.00, while maintaining a Market Perform rating. The firm's analysis highlighted Foot Locker's recent turnaround and diversified brand portfolio.
The company is also expanding its "Reimagined" store concept and enhancing its digital presence, aiming for a 25% e-commerce penetration by 2026. Foot Locker's full-year non-GAAP EPS guidance remains at $1.50 to $1.70, with comps expected to be +1% to +3%.
These recent developments indicate Foot Locker's execution of its Lace Up Plan, focusing on elevating sneaker culture and transforming its real estate footprint.
InvestingPro Insights
Foot Locker's recent financial performance has sparked interest among investors, and real-time data from InvestingPro provides a deeper look into the company's current market position. With a Market Cap of approximately $2.79 billion and a notable Revenue of $8.15 billion over the last twelve months as of Q2 2025, Foot Locker's financial health seems robust. Despite a slight decline in revenue growth of -1.88% during the same period, the company has maintained a Gross Profit Margin of 27.66%, signaling effective cost control measures.
InvestingPro Tips suggest that Foot Locker's net income is expected to grow this year, which aligns with the company's positive outlook for the latter half of 2024. However, investors should note that 9 analysts have revised their earnings downwards for the upcoming period, indicating potential headwinds that could affect future performance. Additionally, the stock has experienced a significant drop over the last week, which may present a buying opportunity for those who believe in the company's long-term strategy, especially considering its strong return over the last three months.
For those looking to delve further into Foot Locker's prospects, InvestingPro offers additional insights. With more tips available on the platform, investors can gain a comprehensive understanding of the company's potential. Visit InvestingPro for a complete list of tips to inform your investment decisions.
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