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Foot Locker Continues to Be Bullish

July 16, 2014 | About:

Comfort comes first in an athlete’s mind, especially while choosing any apparel. So the apparel giants are on a constant innovating spree to create a significant market niche for them. Due to falling raw material prices and upcoming sports events, the athlete footwear industry is gaining momentum. The total size of the U.S. footwear industry approximately stands at $53.7 billion.

Founded in 1879, Foot Locker (NYSE:FL) 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.

Headquartered in New York City, Foot Locker is an athletic footwear and apparel retailer. To improve overall performance in the long-run, the company has undertaken several initiatives.

Results Recently

Quarterly earnings have notched up for the last 15 years. Per-share earnings in the first quarter ending May 3 jumped 22% to $1.11 a share. Total revenue was up 14% to nearly $1.9 billion and same-store sales in the quarter advanced 7.6%.

Sneakers have also been fueling sales at Kids Foot Locker, which has shown mid-teen to 20% growth the past few quarters. Globally, sales have been strong in European markets. Foot Locker acquired Runners Point to gain exposure to the German market. The acquisition is already proving to be a worthwhile one as the division saw a 14% gain in sales.

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 gain a better position. FL's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been successful management of debt levels.

The company has demonstrated a pattern of positive earnings per share growth over the past two years. Apart from delivering strong top-line and bottom-line growth, the company is also known for its shareholder-friendly moves. In fiscal year 2013, the company bought back 6.4 million shares worth $229 million, which includes 1.6 million shares repurchased in the fourth quarter.

Management hiked the quarterly dividend by 10% and approved capex of $220 million for the year 2014.

Over the past 5 years Foot Locker has been an incredible comeback story. Shares have now climbed nearly 14x in value since the bottom in 2009.

What to Expect

On the women's side, Foot Locker is testing a fitness concept called Six:02, which carries yoga pants, work-out wear and other related apparel. Six:02 now has nine stores open and an e-commerce site. The company pointed out that it will roll out many more stores next year.

FL is planning to expand further in Europe. The company is in plans to expand its children’s business through new Kids Foot Locker stores. Foot Locker's aggressive expansion to new European markets could help drive sustainable long-term growth as the company increases its scale in Europe.

After delivering robust 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 is concentrating on long term plans which include European expansion, store remodels, heavier technological investments, and an increased focus on its women’s business.

To End

Foot Locker's customers are going especially wild for colorful basketball shoes, the fastest growing category in the athletic footwear market. The management of FL told that the passion for basketball is even spreading to soccer-obsessed Europe.

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.

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.

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Ayush Singh
Ayush Singh - 3 years ago    Report SPAM


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