Foot Locker (FL) earnings preview: Why Q3 is crucial for sneaker retailer

Foot Locker (NYSE: FL) is all set to release its third-quarter numbers on Friday at 6:45 am ET. The consensus forecast is for a 14% increase in earnings to $1.08 per share. Analysts are looking for revenues of $1.94 billion, which is higher than in the year-ago period. Earnings missed the Street view in each of the trailing two quarters.

The company’s store network has shrunk progressively in recent quarters, reflecting the change in customer preferences and growing competition. Earlier, the management had cautioned about the persistent weakness in demand. After a rather unimpressive start to the year, the company took prompt measures to ramp up operations, such as an extensive store remodeling program aimed at improving customer experience through special features like in-store shops.

New Strategy

Also, efforts are on to lure women and children to the stores by upgrading the assortment. These initiatives, combined with effective inventory management and aggressive e-commerce push, are brightening the company’s prospects as the year progresses. It will have a positive effect on the third-quarter numbers also.

Also see: Walmart stock rises on Q3 earnings beat

Though margins remain under pressure from elevated costs and unfavorable foreign exchange rates, factors like the growing presence of the business in overseas markets and positive response to the direct-to-consumer shift could offset a part of the impact. In short, Foot Locker is probably heading to a promising holiday season that would help it start the next fiscal year on an upbeat note.

Looking Back

The continuing deceleration of comparable sales growth weighed on Foot Locker’s second-quarter results, with earnings falling 12% annually to $0.66 per share on revenues of $1.77 billion, which was slightly below last year’s level. The numbers also missed Wall Street’s forecast.

Others

Among others in the sportswear market, Dick’s Sporting Goods (DKS) will be unveiling its third-quarter numbers on November 26, before the opening bell. Market watchers are looking for a 5% decline in earnings to $0.37 per share.

Related: Foot Locker Q2 2019 Earnings Call Transcript

Foot Locker’s shares took a severe beating after its performance in the initial months of the year fell short of expectations. Overall, the stock has declined 17% in the past twelve months, all along underperforming the market.

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