Foot Locker Sprints Ahead


Apparel retailer Foot Locker (NYS: FL) saw its profits sextuple as demand for its shoes soared this quarter and the results lapped Street estimates.

Retailers have felt the heat as recession-weary consumers have looked for bottom-of-the-barrel deals. Dick's Sporting Goods (NYS: DKS) and Timberland (NYS: TBL) saw strong sales growth in their most recent quarters, and Foot Locker has been no different in following this trend.

A look at the numbers
Revenues for the quarter rose to $1.28 billion, up 16% from a year ago. Foot Locker, which sports brands from stalwarts such as Nike (NYS: NKE) and Adidas, was helped by strong sales in its men's and kids' categories. Same-store sales rose by 11.8%, and Foot Locker was also helped in part by a favorable foreign exchange rate.

Despite higher input costs, Foot Locker gained operating leverage from its strong revenue growth. Operating margins improved to 4.6% from 1% a year ago. Net income increased to $37 million, more than six times last year's earnings. Foot Locker has opened 35 stores this year, taking the total store count up to 3,407.

Foot Locker has a lot to look forward to in the coming months with several sporting seasons about to start. To add to that, next year's Olympics should also help add to sales of running shoes, where it has already seen high sales growth. However, the ongoing NBA lockout, if it comes into effect, could weigh on results.

The Foolish bottom line
Foot Locker had a strong quarter and I think it will carry the strong sales forward into the forthcoming quarters. However, adverse economic conditions, especially in Europe and the U.S., could dampen sales. But for the time being, the company's racing ahead.

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At the time thisarticle was published Shubh Datta doesn't own any shares in the companies mentioned above.The Motley Fool owns shares of Timberland. Motley Fool newsletter services have recommended buying shares of Nike and Timberland. Motley Fool newsletter services have recommended creating a diagonal call position in Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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