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Factors Setting the Tone for Foot Locker (FL) in Q4 Earnings
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Foot Locker, Inc. (FL - Free Report) is slated to release fourth-quarter fiscal 2017 results on Mar 2. Well the obvious question that comes to mind is whether this retailer of athletic shoes and apparel will be able to deliver a positive earnings surprise in the quarter to be reported.
In the trailing four quarters, the company missed the Zacks Consensus Estimate by an average of 4.8%. Nonetheless, in the preceding quarter the company posted positive earnings surprise of 8.8%.
The Zacks Consensus Estimate for the quarter under review has increased by a couple of cents in the past 30 days and is currently pegged at $1.25. However, it shows a sharp decline from earnings of $1.37 per share reported in the year-ago period.
Let’s analyze the factors influencing the company’s performance.
Factors at Play
Foot Locker is certainly trying to improve performance through operational and financial initiatives. Management believes that capitalizing on opportunities like kids’ and women’s business, shop-in-shop expansion in partnership with its vendors, store banner.com business, store refurbishment and enhancement of assortments, is likely to benefit the company in the long run. It is focusing on augmenting e-commerce platform, growing direct-to-consumer operations and tapping underpenetrated markets.
Industry experts believe that these endeavors are likely to support the top line. Analysts polled by Zacks expect fourth-quarter revenue to come in at $2,221 million, up roughly 5% year over year, following declines of 0.8% and 4.4% in the preceding two quarters.
In spite of expected increase in the total revenue, gross margin is likely to remain under pressure in the quarter. Foot Locker had earlier projected gross margin (on a 13-week basis) to contract in the range of 220-240 basis points in the final quarter of fiscal 2017 due to higher markdowns.
During the third quarter, gross margin contracted 290 basis points to 31% of sales primarily due to fall in merchandise margin on account of higher markdowns to pull traffic and clear slow-moving inventory. Gross margin had contracted 340 and 100 basis points in the second and first quarter, respectively.
Further, SG&A as a percentage of sales is likely to be up 60-80 basis points in the fourth quarter. SG&A expense rate increased 30 basis points to 19.7% during the third quarter.
As a result, the bottom line is likely to decline in the quarter. Foot Locker had earlier forecasted earnings per share to decline in the range of 15-25% in the fourth quarter, excluding the benefit of 12 cents a share from 53rd week. In the third, second and first quarter, the same has declined 23%, 34% and 2.2%, respectively.
Foot Locker, Inc. Price, Consensus and EPS Surprise
Our proven model shows that Foot Locker is likely to beat estimates this quarter. A stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Foot Locker carries a Zacks Rank #2 and has an Earnings ESP of +3.88%. This makes us reasonably confident about the bottom line outperforming the estimate.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:
Best Buy (BBY - Free Report) has an Earnings ESP of +4.59% and a Zacks Rank #2.
L Brands (LB - Free Report) has an Earnings ESP of +0.41% and a Zacks Rank #3.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Factors Setting the Tone for Foot Locker (FL) in Q4 Earnings
Foot Locker, Inc. (FL - Free Report) is slated to release fourth-quarter fiscal 2017 results on Mar 2. Well the obvious question that comes to mind is whether this retailer of athletic shoes and apparel will be able to deliver a positive earnings surprise in the quarter to be reported.
In the trailing four quarters, the company missed the Zacks Consensus Estimate by an average of 4.8%. Nonetheless, in the preceding quarter the company posted positive earnings surprise of 8.8%.
The Zacks Consensus Estimate for the quarter under review has increased by a couple of cents in the past 30 days and is currently pegged at $1.25. However, it shows a sharp decline from earnings of $1.37 per share reported in the year-ago period.
Let’s analyze the factors influencing the company’s performance.
Factors at Play
Foot Locker is certainly trying to improve performance through operational and financial initiatives. Management believes that capitalizing on opportunities like kids’ and women’s business, shop-in-shop expansion in partnership with its vendors, store banner.com business, store refurbishment and enhancement of assortments, is likely to benefit the company in the long run. It is focusing on augmenting e-commerce platform, growing direct-to-consumer operations and tapping underpenetrated markets.
Industry experts believe that these endeavors are likely to support the top line. Analysts polled by Zacks expect fourth-quarter revenue to come in at $2,221 million, up roughly 5% year over year, following declines of 0.8% and 4.4% in the preceding two quarters.
In spite of expected increase in the total revenue, gross margin is likely to remain under pressure in the quarter. Foot Locker had earlier projected gross margin (on a 13-week basis) to contract in the range of 220-240 basis points in the final quarter of fiscal 2017 due to higher markdowns.
During the third quarter, gross margin contracted 290 basis points to 31% of sales primarily due to fall in merchandise margin on account of higher markdowns to pull traffic and clear slow-moving inventory. Gross margin had contracted 340 and 100 basis points in the second and first quarter, respectively.
Further, SG&A as a percentage of sales is likely to be up 60-80 basis points in the fourth quarter. SG&A expense rate increased 30 basis points to 19.7% during the third quarter.
As a result, the bottom line is likely to decline in the quarter. Foot Locker had earlier forecasted earnings per share to decline in the range of 15-25% in the fourth quarter, excluding the benefit of 12 cents a share from 53rd week. In the third, second and first quarter, the same has declined 23%, 34% and 2.2%, respectively.
Foot Locker, Inc. Price, Consensus and EPS Surprise
Foot Locker, Inc. Price, Consensus and EPS Surprise | Foot Locker, Inc. Quote
What the Zacks Model Unveils?
Our proven model shows that Foot Locker is likely to beat estimates this quarter. A stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Foot Locker carries a Zacks Rank #2 and has an Earnings ESP of +3.88%. This makes us reasonably confident about the bottom line outperforming the estimate.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:
Dillard's (DDS - Free Report) has an Earnings ESP of +15.83% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Best Buy (BBY - Free Report) has an Earnings ESP of +4.59% and a Zacks Rank #2.
L Brands (LB - Free Report) has an Earnings ESP of +0.41% and a Zacks Rank #3.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>