Foot Locker Pops 25% In Pre-Market On Surprise 2Q Sales, Profit Outlook

Shares in Foot Locker are jumping 25% in Monday’s pre-market trading after the athletic shoe retailer said same-store sales rose a preliminary 18% in the second quarter outpacing analysts’ expectations for a decline.

The stock is currently advancing to $34.23 in the early trading session. Same-store sales in the second quarter increased about 18% year-on-year versus the Street consensus for a drop of 23.6%, as Foot Locker (FL) started to reopen stores and experienced pent-up demand supported by US fiscal stimulus.

Diluted earnings per share in the second quarter are expected to be $0.38 to $0.42 per share down from $0.55 during the same period last year. Foot Locker said it is poised to incur pre-tax charges of about $19 million related to the wind down of the Runners Point banner and the Eastbay restructuring, and about $18 million for costs incurred tied to the recent social unrest. Meanwhile, adjusted EPS is estimated at $0.66 to $0.70, compared with the consensus for a per-share loss of $0.60.

“As we continued to reopen stores throughout the quarter, we saw a strong customer response to our assortments, which we believe was aided by pent-up demand and the effect of fiscal stimulus,” Foot Locker CEO Richard Johnson said. “This fueled our in-store sales and also drove continued momentum across our digital channels.”

Johnson added that “while these undoubtedly remain challenging times, we are nonetheless pleased the strength of our vendor relationships.”

Foot Locker said the company was able to return to positive earnings per share due to the lift in “top-line sales and disciplined expense management”.

The company is scheduled to report second-quarter financial results before the US markets open on Aug. 21. (See FL stock analysis on TipRanks)

Susquehanna analyst  Sam Poser late last month reiterated a Buy rating on the stock, with a $35 price target, saying that: “current trends remain stronger than consensus estimates imply, and the stock is trading at approximately three turns below its five-year average FY2 P/E multiple.”

Overall the stock shows a Moderate Buy analyst consensus, with 7 Hold ratings, 4 Buy ratings and 1 Sell rating. With shares trading down about 30% on a year-to-date basis, the average analyst price target stands at $30.27 (10% upside potential).

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