As estimated by the NPD Group, basketball shoe sales surged 21% in the last year. This highlights the growing demand for athletic shoes, basketball footwear in particular. This is the reason why athletic footwear retailers are witnessing higher sales. Further, new and innovative designs and technological advancements have also been an important driver. Thus, investors should take a look at such companies, which are faring well these days.
Foot Locker (FL, Financial) is one such company which is doing extremely well. Its second quarter results rocked the Street, beating the estimates and pushing its share price higher. Let us check.
Snapshot of the quarter
The top line jumped 13% to $1.64 billion, over last year’s quarter. This was higher than the analysts’ estimate of $1.57 billion and was driven by a remarkable same store sales growth of 7%. Also, the addition of 14 new outlets resulted in higher sales during the quarter. Further, it has been remodelling its stores to make it more attractive to customers. It renovated 112 outlets during the last quarter and plans to continue to do so.
Moreover, Foot Locker registered an expansion in the grow margin of 80 basis points, clocking in at 32%. Margins increased mainly due to higher markdowns and efficient management of fixed occupancy costs. Further, adjusted earnings jumped a whopping 39% to $0.64 per share, as compared to the last year.
What drives footwear demand?
Higher demand for athletic shoes and apparel has been one of the key drivers for higher sales. Also, the retailer did not restrict itself to offering athletic wear only. It expanded its product assortments to include products which are as per the new fashion trends.
Also, growth of Nike (NKE, Financial) has been instrumental to its growth. Nike is a footwear manufacturer which supplies products to retailers such as Foot Locker and Finish Line (FINL, Financial). Nike’s new designs and technological developments have attracted most of customer attention. New products such as Nike+ and new running shoes have been some of the game changers, which keep luring people towards its products. Also, its products provide great comfort to the customers.
Finish Line too has been enjoying the benefits of higher demand for Nike’s footwear. This was evident in its last quarter results, wherein it was able to beat both the top line and the bottom line expectations. Also, its same store sales grew 5% over last year. Therefore, stock price appreciation of the three footwear companies is quite obvious. Nike’s share price has advanced 41% and that of Finish Line has surged 23.7%. But Foot Locker leads the pack with a share price growth of 72.4%.
Future looks bright
Foot Locker has been able to register higher growth mainly due to its endless efforts. Its acquisition of Runners Point Group some time back, has been beneficial. Furthermore, it has partnered with Under Armour (UA, Financial) to launch a new range of ClutchFit Drive Elite 24 Collection this month. In fact, Foot Locker declared that the launch of Speedform Apollo shoes has resonated well with customers.
Winding up
This new partnership should help the footwear retail witness further growth. Its expansionary moves, as well as the remodelling of existing stores should also help in driving traffic. Moreover, Nike has been a consistent contributor to its results and its new products should continue to benefit in the future months. Therefore, this footwear giant definitely deserves a place in your portfolio.
