Foot Locker Q3 Results Top Estimates

Foot Locker (FL) delivered stronger-than-expected Q3 2021 results, characterized by impressive top- and bottom-line growth. Revenue and earnings landed above consensus estimates, as the company benefited from a robust back to school season. Nonetheless, FL shares fell 11.95% to close at $50.68 on November 19.

Foot Locker is a U.S. retailer that specializes in athletic shoes and apparel. It operates through its Athletic Store and Direct-to-Customer segments.

Q3 Results

Total sales in the quarter increased 3.9% to $2.19 billion, compared to $2.11 billion delivered the same quarter last year and above consensus estimates of $2.12 billion. Comparable store sales grew 2.2% in the quarter.

Adjusted Diluted EPS landed at $1.93, an improvement from $1.21 a share delivered the same quarter last year. Earnings also topped consensus estimates of $1.34 a share. Gross margin expanded 3.8% to 34.7%, attributed to robust demand and fresh inventory.

Foot Locker exited the third quarter with $1.3 billion in merchandise inventories, up 9.1% year-over-year. Cash and cash equivalent totaled $1.34 billion, with debt on the balance sheet of $560 million.

During the quarter, Foot Locker bolstered its balance sheet with the issuance of $400 million of Senior Notes, due 2029. The company also completed the acquisition of WSS, a U.S.-based athletic footwear and apparel retailer. Additionally, it completed the purchase of atmos, a Japanese retailer. (See Top Smart Score Stocks on TipRanks)

Stock Rating

Last week, Jefferies analyst Janie Stichter reiterated a Buy rating on the stock and lowered the price target to $80 from $91, implying 57.85% upside potential to current levels. According to the analyst, sales and margin momentum are encouraging, and she believes the shares are still inexpensive at current levels.

Consensus among analysts is a Hold, based on 3 Buys, 7 Holds and 1 Sell. The average Foot Locker price target of $64.36 implies 26.99% upside potential to current levels.

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