Foot Locker Earnings Preview

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Foot Locker (NYS: FL) will try to beat its earnings estimates for the fifth consecutive quarter. The company will unveil its latest earnings Thursday. Foot Locker operates as a global retailer of athletic footwear and apparel. The company operates in two reportable segments: athletic stores and direct-to-customers.

What analysts say:

  • Buy, sell, or hold?: The majority of analysts back Foot Locker as a buy. But with 58.3% of analysts rating it a buy, Foot Locker is still below the mean analyst rating of its nearest eight competitors, which average 75.6% buys. Analysts don't like Foot Locker as much as competitor DSW overall. Ten out of 12 analysts rate DSW a buy compared with seven of 12 for Foot Locker. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared with three months ago.
  • Revenue Forecasts: On average, analysts predict $1.18 billion in revenue this quarter. That would represent a rise of 7.3% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.12 per share. Estimates range from $0.07 to $0.17.

What our community says:
The majority of CAPS All-Stars see Foot Locker as a good bet, with 68.9% assigning it an "outperform" rating. The majority of the Fools are in agreement with the All Stars as 66% give it an "outperform" rating. Fools are gung-ho about Foot Locker, though the message boards have been quiet lately with only 96 posts in the past 30 days. Foot Locker's bearish CAPS rating of two out of five stars falls short of the Fool community sentiment.

Management:
Foot Locker's income has fallen year over year by an average of more than twofold over the past five quarters. Revenue has now gone up for three straight quarters. The company boosted its gross margin by two percentage points in the last quarter. Revenue rose 13.3% while cost of sales rose 10% to $977 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q1

Q4

Q3

Q2

Gross Margin

32.7%

30.9%

30.3%

27.8%

Operating Margin

10.3%

5.8%

5.8%

1.0%

Net Margin

6.5%

4.1%

4.1%

0.5%

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At the time this article was published

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