FL 012712
Foot Locker (FL)
Usually you look to the sky when you are dreaming of bigger and better things. But in this case, you might want to take a look at your shoes! Of course foot locker is more than just a shoe company; I’ll get to that in just a second.
Foot locker saw a sharp drop-off in sales when the recession hit, but has since been recovering and seems to be gaining momentum here. If you are a believer in the consumer comeback, you might not need to look further than your own two feet.
Company Description & Developments
Foot Locker is one of the world’s premier retailers of athletic footwear and apparel. They currently operate 3,426 stores in 21 countries around the world under several brand names including Lady Foot Locker, Kids Foot Locker, Footaction, Champs Sports and CCS.
In addition to their brick and mortar stores, Foot Locker conducts a great deal of business through their internet and catalog channels. The company set several goals for the upcoming year including overall sales of 6 billion, sales per gross sq. ft. of $400, net income margin of 5% and inventory turnover of 3 times.
The apparel maker has been fairly quiet in terms of press releases since declaring their dividend in November, but a look at their peers shows that strength is growing in the sector. Last quarter they reported their seventh consecutive quarter of sales and profit growth. If the economic picture continues to improve this trend is most likely to continue.
Financial Profile
Foot Locker is a mid-cap company (4.01 billion) that is trading at about 16 times trailing earnings (P/E). Looking forward, Zacks Consensus Estimates are calling for that number to drop to 14.83 with no change in price from these levels.
Foot Locker hit the Zacks Rank 1 Strong Buy list January 21st. It has been a Zacks Rank 2 since November 16th.
Foot Locker reported a 9.3% quarterly sales increase at their last earnings report, year over year sales growth of about 9% as well. They saw a jump of 30% in sales year over year with total sales of roughly 5 billion in FY2011. Foot Locker is expected to earn $1.77 in FY2012 according to the Zacks Consensus Estimate.
Earnings Estimates
Foot Locker has garnered quite a bit of upward revisions over the past 3 months. We did notice a couple analysts revise next quarter and next year’s earnings estimates up within the past month. This is most likely due to the large amount of revisions that were made in November and December after the report. Foot Locker will report Q1 (2012) results on February 22nd.
Expectations are for Foot Locker to generate $0.50 in income this quarter. Of the 11 analysts who cover FL, the consensus is for the company to grow earnings by 61% in FY2012 with another jump of 14.74% in FY2013. Obviously expectations for FY2012 are high.
In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates higher than they were 90 days ago from current quarter, out to FY 2013. This again reflects the bullish sentiments as Foot Locker continues to grow.
Foot Locker beat estimates last quarter by 10.26%. The company has a history of beating estimates and averaged to top estimates by an average of over 38% over its past four earnings reports.
Market Performance & Technicals
Foot Locker has been extremely bullish since August of last year, but has gone almost parabolic over the past couple weeks. This recent run may need a break before it resumes. Even though the stock hasn’t broken above its Bollinger Band, it has been riding right along it, indicating a stock that is in short term overbought territory.
Foot Locker continues to make new 52 week highs. Friday it managed to make another leap into the 52 week high cloud even as the markets looked shaky. FL has remained above its 50 day moving average for the better part of two months, currently that average stands at $24.05. The 200 day moving average currently stands at $22.33.
Foot Locker had its running shoes on this year; the stock outpaced the S&P 500 by almost 43% in 2011. Over the last twelve weeks, FL has been ahead of the S&P by almost 12%. Look for the pullback before entry in this one. The $25.00 level looks like decent short term support.
Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.
