Foot Locker Gains 6% Despite Mixed Q1 Results

Shares of Foot Locker, Inc. (FL) gained 6.2% at the time of writing despite reporting mixed first-quarter 2022 results. The company engages in the retail of athletic shoes and apparel.

Q1 adjusted earnings of $1.60 per share surpassed the consensus estimates of $1.54 per share. However, the figure compares unfavorably with the $1.96 reported in the same quarter last year.

Foot Locker’s quarterly sales of $2.18 billion climbed 1% compared to the prior-year period and marginally missed the analyst estimate of $2.2 billion. Q1 comparable sales declined 1.9%, and apparel sales outpaced footwear sales.

Gross margin contracted 80 basis points year-over-year due to rising supply chain costs and higher markdowns against the historically-low markdowns seen last year. Notably, 24 new stores were opened in the first quarter, while 23 were remodeled or relocated and 67 stores were closed.

CEO’s Comments

Chairman and CEO of Foot Locker, Richard Johnson, said, “Our progress in broadening and enriching our assortment continues, as we continue to meet our customers’ demand for choice. These efforts helped drive our strong results in the first quarter, and we believe will allow us to more fully participate in the robust growth of our category going forward.”

“As we elevate brands across our portfolio, continue to use our real estate flexibility to optimize our footprint, and evolve our omnichannel capabilities, we are excited about our improving ability to expand our customer base and fuel our consumer’s desire for self-expression,” Johnson added.

Guidance

Foot Locker has guided for 2022 sales growth to be down 4% to 6% and comparable sales growth to be down 8% to 10%.

Additionally, FL has guided adjusted earnings to fall in the upper end of the range of $4.25 per share to $4.60 per share versus the consensus estimate of $4.42 per share.

Wall Street’s Take

Overall, FL stock has a Hold consensus rating on Wall Street based on three Buys, 12 Holds, and four Sells assigned in the past three months. The average Foot Locker price target of $32.38 implies 1.2% upside potential from current levels.

Hedge Fund Activity

TipRanks’ Hedge Fund Trading Activity tool shows that the confidence of hedge funds in Foot Locker is currently very negative. The cumulative change in holdings across all 11 hedge funds that were active in the last quarter decreased by 1.1 million shares.

Conclusion

The company has faced headwinds in the first quarter, posting mixed results. Also, the current inflationary environment and other macro-challenges make it difficult for retailers to operate smoothly. Thus, investors interested in FL may want to wait for some time to see how things unfold for the stock.

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