The other shoe dropped this morning, after the company reported earnings of 62 cents a share, which missed Wall Street estimates of 90 cents a share, and revenue of $1.70 billion, versus estimates of $1.80 billion.
Total sales fell by 4.4% for the second quarter due largely in part to swings in forex prices, and gross margins dropped to 29.6% of sales from 33% a year ago. Comparable same-store sales dropped 6% versus a year ago, which marked the first time in over seven years that Foot Locker registered a negative comparable same-stores figure.
This disaster of a quarter for Foot Locker is dragging down the leading sports apparel and footwear players, like Under Armour Inc. (UA) - Get Under Armour, Inc. Class C Report , which is trading off 3.8% to $15.65 a share, and Nike Inc. (NKE) - Get NIKE, Inc. (NKE) Report , which is falling 3.8% to $55.30 a share.
At last check, FL was plunging lower by 26% to $35 a share on heavy volume. Volume so far in Friday's trading session has already hit more than 23 million shares, which is well above its three-month average action of 4.06 million shares.
If you take a look at the chart for FL, you'll notice that this stock was already in a massive downtrend heading into the quarter, with shares falling off their April high of $77.36 to just under $45. During that downtrend, this stock was making mostly lower highs and lower lows, which is bearish technical price action.
This high-volume gap to the downside on Friday has now pushed shares of Foot Locker below some previous major support levels at $46.40 to $44.60 a share. This stock is now trending below all of its major moving averages. To illustrate that point, shares of Foot Locker are now trading around 30 points below its 200-day moving average of $65.25 a share.
Shares of Foot Locker have now traded down very close to its 2014 low of $34.49 a share, after it hit its intraday low of $34.55 a share. That's the big level that investors need to watch now. If this stock does not start to bounce and find support near $34.49 or just above it, the chart sets up for another leg down that will likely take FL back toward its next major support levels at $30 to around $28 a share.
Considering the horrible quarter, it's very likely that FL breaks below that level in the coming days or weeks, so longer-term investors should continue to remain on the sidelines and expect more downside unless that level does hold. If that level holds, then of course we could see a bounce, but the odds will drop dramatically if that bounce doesn't start soon.
The bottom line, shares of Foot Locker are clearly in distribution mode following a weak quarter and no signs from the company that a turnaround is in the cards anytime soon.
If that 2014 low of $34.49 doesn't hold, we're going to see more downside to $30 or much lower. Bullish investors should revisit this stock once it starts to stabilize and trend sideways for a bit, so you know the sellers are done. If a bounce does start, you know exactly where to place your stop -- at or around the $34.49 level.
More of What's Trending on TheStreet:
- Foot Locker's Epic Stock Crash Explains It All on This New Mall Death Investment
- Watch Your Back, Costco -- Sam's Club Is Stalking You
- Cisco Does Something That Makes Another Tech Stock a Worthy Buy
- Amazon Is Absolutely 'Doing Great Damage.' Duh, Mr. President, That's Business
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.