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Category: Stock Market and Footlocker
Date: 3 March 2020 Stock Price: $33.67 We take a look at the 4th quarter 2019 earnings release from sporty clothing and apparel company, Foot Locker. The stock was down almost 8% following the release of their 4th quarter 2019 earnings report.
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About Foot Locker
Foot Locker, Inc. (NYSE:FL) is a leading global retailer of athletically inspired shoes and apparel. Headquartered in New York City, the company operates approximately 3,200 athletic retail stores in 27 countries, as well as websites and mobile apps, under the brand names Foot Locker, Champs Sports, Eastbay, Kids Foot Locker, Footaction, Lady Foot Locker, Runners Point, and Sidestep.
With its various marketing channels and experiences across North America, Europe, Asia, Australia, and New Zealand, the Company's purpose is to inspire and empower youth culture around the world, by fueling a shared passion for self-expression and creating unrivaled experiences at the heart of the sport and sneaker communities. The image below shows the business highlights for the group.
With its various marketing channels and experiences across North America, Europe, Asia, Australia, and New Zealand, the Company's purpose is to inspire and empower youth culture around the world, by fueling a shared passion for self-expression and creating unrivaled experiences at the heart of the sport and sneaker communities. The image below shows the business highlights for the group.
Overview of Footlocker's 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise
- Sales $: 2.221 billion (down from $2.272 billion for the same quarter of the prior year)
- Sales decreased by -2.2% over the last 12 months
- Cost of sales: $1.521 billion (down from $1.537 billion for the same quarter of the prior year)
- Cost of sales decreased by -1.04% over the last 12 months
- Net income: $141 million (down from $158 million for the same quarter of the prior year)
- Diluted earnings per share: $1.34 (down from $1.39 for the same quarter of the prior year)
- PE ratio of Foot Locker: 7.4
- Dividend per share: $0.40
- Dividend yield of Foot Locker: 4.8% (assuming the dividend paid this quarter is paid for all 4 quarters of the financial year)
- Shares outstanding : 105.2 million (down from 113.3 million for the same quarter of the prior year)
- Cash and equivalents: $907 million
- Cash and equivalents per share: $8.62
- Cash and equivalents makes up 25.6% of Foot Locker's market capital
- Cash and equivalents makes up 13.7% of Foot Locker's total assets
- Inventories: $1.227 billion (down -2.15% from $1.254 billion for the same quarter in the prior year)
- Inventories makes up % of Foot Locker's total assets
- Accounts payable: $333 million (down from $387 million for the same quarter in the prior year)
- Accounts payable makes up 5% of Foot Locker's total assets
- Stockholders equity in Foot Locker: $2.480 billion
- Stockholders equity per share: $23.57
- So Foot Locker is trading at 1.43 times its stockholders equity which is outside the expected the range of between 2 and 4 times that most firms tend to trade at.
- Stockholders equity per share: $23.57
Foot Locker management commentary on their 4th quarter 2019 earnings
NEW YORK, NY, February 28, 2020 – Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, today reported financial results for its fourth quarter and fiscal year ended February 1, 2020.
“While we had leading positions in key on-trend footwear styles, this was not enough to offset softer than expected demand during the compressed holiday season, a very promotional marketplace for apparel, and tougher launch comparisons,” said Richard Johnson, Chairman and Chief Executive Officer.
“We took actions during the quarter to manage slower moving items which pressured our gross margin rate more than expected,” added Lauren Peters, Executive Vice President and Chief Financial Officer. “Importantly, our ongoing disciplined expense management enabled us to better align our variable expenses with the softer sales trends, while continuing to invest in our key strategic imperatives. Additionally, the early benefits from the investments in our websites and logistics systems, together with our associates’ commitment to outstanding customer service, positioned us to produce a single day record volume, with sales exceeding $115 million.”
“We built a strong foundation in 2019 and we believe we have the right plan in place to deliver against our long-term financial objectives,” added Mr. Johnson. “We are optimistic about our Company’s future, and by making progress against our strategic imperatives, we believe we will strengthen our position at the center of sneaker and youth culture, and create value for our shareholders.”
“While we had leading positions in key on-trend footwear styles, this was not enough to offset softer than expected demand during the compressed holiday season, a very promotional marketplace for apparel, and tougher launch comparisons,” said Richard Johnson, Chairman and Chief Executive Officer.
“We took actions during the quarter to manage slower moving items which pressured our gross margin rate more than expected,” added Lauren Peters, Executive Vice President and Chief Financial Officer. “Importantly, our ongoing disciplined expense management enabled us to better align our variable expenses with the softer sales trends, while continuing to invest in our key strategic imperatives. Additionally, the early benefits from the investments in our websites and logistics systems, together with our associates’ commitment to outstanding customer service, positioned us to produce a single day record volume, with sales exceeding $115 million.”
“We built a strong foundation in 2019 and we believe we have the right plan in place to deliver against our long-term financial objectives,” added Mr. Johnson. “We are optimistic about our Company’s future, and by making progress against our strategic imperatives, we believe we will strengthen our position at the center of sneaker and youth culture, and create value for our shareholders.”
“As previously announced, our Board of Directors approved a meaningful dividend increase for the tenth consecutive year, a 5 percent increase in our quarterly dividend to $0.40 per share” continued Ms. Peters. “Combined with the Board’s approval of a $275 million capital investment program for 2020, this reflects our Board’s confidence in the Company’s strong financial position and our ability to execute our strategic objectives while continuing to return cash to our shareholders.” Store Base Update During the fourth quarter, the Company opened 32 new stores, remodeled or relocated 66 stores, and closed 63 stores. As of February 1, 2020, the Company operated 3,129 stores in 27 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 130 franchised Foot Locker stores were operating in the Middle East, as well as 9 franchised Runners Point stores in Germany.
Foot Locker stock price history
The image below, obtained from Google shows the stock price history of Foot Locker (NYSE:FL) for the last 5 years. As the image shows its been a pretty volatile but largely negative ride for Foot Locker shareholders over the last number of years. 5 years ago the stock of Foot Locker was trading at $59.40 a stock and its currently trading at $ a stock. That's a loss of -43% suffered by Foot Locker.
The stock of Foot Locker is trading at a lot closer to its 52 week low of $31.23 than it is to its 52 week high of $65.04 which to us is a clear indication that the short term sentiment and momentum of Foot Locker's stock is overwhelmingly negative. As is the case with most stocks right now as the fears around Coronavirus spreads across global financial markets.
The stock of Foot Locker is trading at a lot closer to its 52 week low of $31.23 than it is to its 52 week high of $65.04 which to us is a clear indication that the short term sentiment and momentum of Foot Locker's stock is overwhelmingly negative. As is the case with most stocks right now as the fears around Coronavirus spreads across global financial markets.
Recent coverage of Foot Locker
The extract below covers the latest earnings report from Foot Locker as obtained from TheStreet.com
Foot Locker Inc. (FL) posted stronger-than-expected fourth quarter earnings Friday but weak holiday demand and tough competition in sports clothing markets held back same-store sales growth. Foot Locker said earnings for the three months ending on February 1 came in at $1.63 per share, up 4.5% from the same period last year and well ahead of the Street consensus forecast of $1.54 per share. Group sales, Foot Locker said, slipped 2.2% to $2.221 billion, just shy of analysts' estimates of $2.24 billion tally. Same stores sales fell 1.6% over the fourth quarter, the company said, compared to the 1% decline forecast from Refinitiv. Looking into the 2021 fiscal year, Foot Locker said it sees same-store sales rising by a low single-digit percentage rate, with earnings increasing in a low to mid-single digit range.
"While we had leading positions in key on-trend footwear styles, this was not enough to offset softer than expected demand during the compressed holiday season, a very promotional marketplace for apparel, and tougher launch comparisons," said CEO Richard Johnson.
Read the full article here
Foot Locker Inc. (FL) posted stronger-than-expected fourth quarter earnings Friday but weak holiday demand and tough competition in sports clothing markets held back same-store sales growth. Foot Locker said earnings for the three months ending on February 1 came in at $1.63 per share, up 4.5% from the same period last year and well ahead of the Street consensus forecast of $1.54 per share. Group sales, Foot Locker said, slipped 2.2% to $2.221 billion, just shy of analysts' estimates of $2.24 billion tally. Same stores sales fell 1.6% over the fourth quarter, the company said, compared to the 1% decline forecast from Refinitiv. Looking into the 2021 fiscal year, Foot Locker said it sees same-store sales rising by a low single-digit percentage rate, with earnings increasing in a low to mid-single digit range.
"While we had leading positions in key on-trend footwear styles, this was not enough to offset softer than expected demand during the compressed holiday season, a very promotional marketplace for apparel, and tougher launch comparisons," said CEO Richard Johnson.
Read the full article here
Foot Locker (NYSE:FL) stock valuation
So what are Foot Locker shares worth based on their latest earnings report? Based on Foot Lockers latest earnings report our valuation model provides a target price (full value price) for Foot Locker at $43.90 a stock. We therefore believe that the stock of Foot Locker is undervalued at its current price.
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price (full value price) which in this case is $43.90 . A good entry point into Foot Locker would therefore be at $39.50 or below
We expect the stock price of Foot Locker to kick up to levels closer to our target price in coming weeks and months. Since the stock of Foot Locker is trading at well below our suggested entry point we rate the stock of Foot Locker as a long term buy
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price (full value price) which in this case is $43.90 . A good entry point into Foot Locker would therefore be at $39.50 or below
We expect the stock price of Foot Locker to kick up to levels closer to our target price in coming weeks and months. Since the stock of Foot Locker is trading at well below our suggested entry point we rate the stock of Foot Locker as a long term buy
Next earnings release of Foot Locker (NYSE: FL)
It is expected that Foot Locker will release their 1st quarter 2020 earnings report towards the end of May 2020