Shares of Foot Locker (NYSE:) rose 30% at the open on Thursday as the company reported first-quarter adjusted earnings per share of $0.22, beating analyst estimates by $0.09.
However, revenue was slightly below expectations: $1.87 billion, compared to the consensus of $1.89 billion. The New York-based athletics retailer also reaffirmed its full-year 2024 adjusted EPS guidance of $1.50-$1.70, in line with the midpoint above the analyst consensus of $1.57.
Foot Locker’s first-quarter results showed a solid start to the year, with President and CEO Mary Dillon crediting the performance to the company’s “Lace Up” plan.
Despite total sales down 2.8% from the same quarter last year and comparable sales down 1.8%, the company managed to increase comparable sales of Foot Locker and Kids Foot Locker globally by 1.1% to increase. Dillon highlighted the company’s disciplined expense management and favorable shifts in the timing of expenses as key factors contributing to the earnings outperformance.
The retailer’s gross margin decreased by 120 basis points compared to the same period last year. Inventory levels were 5.6% lower than at the end of the first quarter of last year, indicating a leaner inventory position.
Dillon expressed confidence in the “Lace Up” plan, which focuses on strengthening brand partnerships, increasing customer engagement and solidifying Foot Locker’s position in sneaker culture. She also noted that the company is investing in store renovations and the introduction of a new store concept, with more openings planned for the year.
Looking ahead, Foot Locker’s full-year 2024 outlook includes a one-time charge related to the rollout of its enhanced FLX loyalty program in North America. Despite this expected burden, the company’s expectations remain stable, pointing to a positive outlook for the remainder of the year.
Following the report, analysts at Telsey said expectations for Foot Locker were low ahead of its Q1 ’24 earnings release, and that the company could beat expectations for comp, gross margin and earnings per share.
However, they added: “The result continues to show challenges at Foot Locker compared to sporting goods retailers such as Dick’s (DKS; Outperform; PT=$255), with a comp of (1.8%) versus Dick’s +5.3% and an operating margin contraction from 348 to 1.7% versus Dick’s contraction of ~50 basis points to 11.0%.”
