Foot Locker Beats Analysts in Q3 as Same-Store Sales Improve 4.1 Percent

Andrew Klips  |

Foot Locker (FL) posted better than expected third-quarter financials Friday morning with a solid increase in same-store sales helping to lift the top and bottom lines to pare higher expenses.

For the quarter ended November 2, the New York-based specialty athletic retailer reported revenue of $1.622 billion, up 6.4 percent from $1.524 billion in the third quarter of 2012.  Net income totaled $104 million, or 70 cents per share, versus $106 million, or 69 cents per share in last year’s quarter.  The company’s share repurchase plan accounted for the higher earnings on a per share basis.  Adjusted earnings, which excluded one-time items, such as tax benefits or costs associated with the integration of Runners Point Group, were 68 cents per share, compared to 63 cents per share in the year prior quarter.

Wall Street was expecting adjusted earnings of 66 cents per share on revenue of $1.57 billion.

Same-store sales, a key indicator of a retailer’s health that compare revenue from stores open more than one year, rose 4.1 percent in the third quarter.  Across the first nine months of 2013, comparable store sales are up 3.7 percent, although if the impact of foreign currency exchange were excluded, same-store sales would be up 5.3 percent.

Profits were masked by higher costs during the quarter.  Selling, general and administrative expenses rose from $319 million in Q3 2012 to $340 million in the latest quarter.  Cost of sales climbed from $1.019 billion to $1.085 billion.

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In July, Foot Locker completed its $94-million acquisition of privately held Runners Point, Group a German athletic store chain.  Runners Point operates more than 200 retail stores, mostly in German under the Runners Point and Sidestep banners, and an online business; generating about $254 million in sales in 2012.

During the third quarter, Foot Locker bought back about 2 million shares of its common stock for $67 million, bringing the 2013 year-to-date repurchase activity to 4.85 million shares for $167 million.

For the year so far, the company has generated $4.714 billion in revenue, up 5.5 percent from $4.469 billion in the same time frame last year.  Foot Locker has grown its revenue every year since 2010 and looks like that streak will continue this year.  Net income has mushroomed more than 700 percent in that time.  For the first nine months of 2013, earnings totaled $308 million, or $2.04 per share, compared to $293 million, or $1.90 per share, at the same time in 2012.

"We have many strategies underway to drive our business, and the advances we have achieved are contributing to the current momentum we have towards reaching our long-range operational and financial goals,” said Ken C. Hicks, chairman and chief executive at Foot Locker, in a statement this morning.  Hicks said the what’s “most exciting” to him, though, is the way that the company is identifying new opportunities to drive growth in the short, medium and long term.

Shares of FL are up about 16 percent in 2013 through Thursday’s close at $36.76.  In early pre-market activity, shares are up 4 percent at $38.20.

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