By all rights, shoe store chain Foot Locker (FL) should be having a much better day. It posted an earnings report that delivered a lot of welcome news but proved insufficiently welcoming for investors, who sent shares down around 11% in Wednesday afternoon’s trading. Overall, its Q2 results were solid enough. Earnings per share came in at -$0.05, which beat estimates of -$0.07 per share.
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In addition, comparable sales were up for the first time in six quarters. Same-store sales were up 2.6% in the fiscal second quarter, and that blew the analyst projections of 0.7% out of the water. Moreover, the gross margin expanded for the first time in more than two years. But not a bit of this stopped shareholders from abandoning ship in droves.
The news also inspired CEO Mary Dillon, who declared that the Lace Up Plan, its turnaround initiative, was working. Further, Dillon noted, “Our top-line trends strengthened as we moved through the quarter, including a solid start to Back-to-School. We were also particularly pleased to deliver stabilization in our Champs Sports banner.”
Changes Are Coming
Yet, even with these successes, shareholders fled. Perhaps one issue that hurt Foot Locker was its announced plan to move its global headquarters to St. Petersburg, Florida, from its original location in New York. The move will be made to “…further support strategic progress against the Lace Up Plan,” noted Foot Locker in a press release.
This will ultimately reduce costs and “…enable increased collaboration among teams across banners and functions.” Once the move is complete, Foot Locker’s presence in New York City will be minimal. Given that a recent Labor Press report noted that New York City is increasingly dangerous for retailers like Foot Locker—National Supermarket Association head Nelson Eusebio noted “…it’s open season on retail workers in the city”—that may also have had something to do with it.
Should You Buy Foot Locker Stock?
Turning to Wall Street, analysts have a Hold consensus rating on FL stock based on two Buys, 12 Holds, and four Sells assigned in the past three months, as indicated by the graphic below. After a 62.66% rally in its share price over the past year, the average FL price target of $28.29 per share implies 3.84% downside risk.
