|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Foot Locker: Gaining Momentum in the Athletic Industry
Posted by: abirk (IP Logged)
Date: March 17, 2014 06:32PM
Comfort is the main criterion for an athlete before choosing any apparel. So, the athletic-apparel giants are constantly innovating more and more new products to create a niche in customers’ hearts. The athletic footwear industry is gaining its momentum due to falling raw material prices and upcoming sports events. In terms of revenues, the total size of the U.S. athletic footwear industry is approximately $53.7 billion, 82.8% of which are contributed by Nike Inc. (NKE) and Adidas AG (ADDYY). Other than these players, Foot Locker Inc. (FL) is also playing well in this industry.
Founded in 1879, Foot Locker is a global retailer of shoes and apparel, operating 3,473 primarily mall-based stores (including 193 Runners Point Group stores) in the United States, Canada, Europe, Australia and New Zealand. The company operates in two segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment is an athletic footwear and apparel retailer whose formats include Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction and CCS. The Direct-to-Customers segment includes Footlocker.com Inc. and other affiliates, including Eastbay Inc. and CCS, which sell to customers through Internet websites, mobile devices and catalogs.
Growth and Impressive Results
Over the last three years, industry revenues have grown approximately 8.6% every year, as the economy recovers from the 2008 recession. However, the industry is estimated to grow approximately 6% annually over the next three years due to a slowdown in economic recovery. The graph provided below displays trends in the industry’s earnings and revenue growth rates over the last five years, and its estimated growth rates for the next three years.
Chart from bidnessetc.com
Revenue and net income growth have shown that Foot Locker's business has been improving rapidly for the past four years. Revenue has increased every year since 2010, rising by 27.4% from $4.8 billion to $6.2 billion. Foot Locker faces a stiff competition from Finish Line Inc. (FINL). This mall-based specialty retailer’s revenue rose by 23.1% from $1.2 billion to $1.4 billion over the same period. Over the past four years, Foot Locker has seen its net income grow by 727.1% from $48 million to $397 million. This made Foot Locker to gain a better position than Finish Line.
On March 7, 2014, this New York-based specialty athletic retailer reported strong financial results for its fourth quarter, and full year ended on February 1, 2014. The company’s quarterly profit surged to $121 million, or $0.81 per share, versus a year-ago profit of $104 million, or $0.68 per share. On a non-GAAP basis, the company earned $0.82 cents per share, a 28% increase over the comparable 13-week non-GAAP earnings per share of $0.64 in 2012. Its sales climbed to $1.79 billion versus $1.71 billion. Foot Locker's same-store sales climbed 5.3% in the quarter, and its shares gained 5.31% to $45.00 in pre-market trading.
On February 1, 2014, the company’s merchandise inventory was $1,220 million, which was $53 million, or 4.5 percent, higher than at the end of last year. At year-end 2013, Foot Locker's cash and short-term investments totaled $867 million, while the debt on its balance sheet was $139 million. During the fourth quarter of 2013, it repurchased approximately 1.6 million shares of its common stock for $63 million. For the full year, Foot Locker repurchased 6.4 million shares for $229 million. During fiscal 2013, the company opened 84 new stores, remodeled or relocated 320 stores, and closed 140 stores.
Further, the company announced a quarterly dividend of 22 cents per share, up from its previous dividend rate of 20 cents. The dividend which is due on May 2, 2014 will be paid to stockholders of record as on Apr 17, 2014.
A chart has been provided below where we can see Foot Locker’s Strategic plans.
Chart from company website
With its strong performance in 2013, Foot Locker believes that by continuing to exploit opportunities like children's business, e-commerce, vendor partnerships (store-in-store), and improved product assortments, and development of its store banner.com will give a strong foothold in the coming years. Further, the company has more long term plans which include European expansion, store remodels, heavier technological investments, and an increased focus on its women’s business.
On a Concluding Note
Foot Locker has a stable and profitable growth. Further, the athletic footwear industry is also gaining its momentum. The company’s expansive strategies have shown robust growth, and the market share of it has been improved as well. In terms of management of its financial resources, Foot Locker’s overall performance has proved very efficient. Recently, acquisition of Runners Point Group has been completed, and this will add an increased momentum to Foot Locker’s portfolio. Finally, the demand for sports shoes will continue to increase in the near future as Americans and Europeans are more focused on exercising and getting healthy. I am therefore pretty bullish that this global retailer will not let its valued investors as well as customers down in the near future.
Stocks Discussed: NKE, ADDYY, FL, FINL,