The athletic footwear and apparel retailer, Foot Locker (FL, Financial), reported its third-quarter numbers very recently. Its numbers were impressive as the retailer's products continued to resonate with the customers. Its shares have risen by 45.8% in the last year as the company beat the consensus in the last four quarters. The footwear retailer beat the Street's view this time also, sending its share price north.
The lucrative quarter
Revenue for the quarter jumped a healthy 6.7% to $1.73 billion over the prior year. This was higher than the analysts' estimate of $1.72 billion. The growth in the top line was driven by same-store sales growth of 6.9%, where its existing stores witnessed higher sales. However, there was a decline of almost 1% in store traffic mainly due to remodeling at some of its stores.
The gross margin of the company also expanded by 10 basis points, clocking in at 33.2%. Earnings also surged 27% to $0.83 per share, over last year. However, the estimate stood at $0.78 per share. Thus, Foot Locker managed to register a decent bottom line which made investors happy.
Further insights
The company also opened 35 new outlets during the quarter, which added to the revenue base. Customers' growing interests in basketball products helped revenue grow. The launch of the new LeBron 12 HRT of a lion, a basketball shoe, gained popularity. There were other basketball shoes which were named after some of the popular athletes such as Kobe Bryant, Kevin Durant and other Nike brands. Another new introduction made recently was the Jordan CP3 VIII, which was liked by the customers.
These new products are attributed to the largest player in innovation, Nike (NKE, Financial). Nike makes 68% of Foot Locker's revenue as customers get attracted to the new and innovative products by this retailer. Nike's new technological advancements have been the key to success for Foot Locker.
Demand in the Kids segment continues to move higher, leading to higher sales. Also, the apparel segment is something to look forward to. Athletic attire is in vogue and has become a part of casual dressing. It is now not limited to the gym only. Hence, sports style apparels attract customers. Further, it is used as a tool to drive customers to stores, which leads to footwear sales also.
Some more efforts
The footwear retailer is also engaged in other efforts to grow its business. The measures include operational and financial initiatives which helped to boost its performance. It has also expanded its portfolio of products and growth in the children's business has been helpful.
Further, it is growing through shop-in-shop expansion as well as international expansion. The company is looking to expand its footprint in the international market, with a special focus on Europe. Both Europe and the Champs Sports division are suffering from weak sales because of their dependence on licensed apparels. However, the retailer's measures should help to overcome these problems.
Key thoughts
Foot Locker is highly dependent on Nike. Its key to success is the wide range of products from Nike, which helps it grow. Nike's technological advancements and new products attract more and more customers. Its expansionary moves, the upcoming holiday season and efforts to increase the apparel business should further help the company. Therefore, this company should continue to beat the market.
