Shares of Foot Locker (FL) rose 0.43% to $71.66 Friday after the sneaker and athletic apparel retailer said third quarter earnings beat expectations and that its inventory is looking good heading into the year-end shopping season.
Foot Locker reported earnings of $1.13 a share, compared with analysts' expectations for $1.10 a share expectations. Revenue of $1.88 billion matched expectations.
Quarterly same store sales rose 4.7% year over year, and were about even compared with the second quarter. Inventory increased 2.2% year over year on a constant currency basis.
"Our inventory is fresh and well positioned as we prepare for the important holiday selling season, and we remain well on track to achieve our annual guidance of a mid-single digit comparable-store sales gain and double-digit earnings per share growth," CFO Lauren Peters said in a statement.
Foot Locker told analysts that it expects to see double digit full year earnings growth after the first quarter, and reiterated that in its second quarter and third quarter earnings releases. Wall Street's consensus is for the company's earnings to rise 10.5% this year.
Analysts at Credit Suisse lowered the company's price target to $68 from $71 Friday, even though the firm says Foot Locker is the best bet in the athletic shoe sector.
"There remains risk from overexposure to brick-and-mortar (2,350 stores domestically) which has held back incremental operating margin expansion. We maintain our Neutral rating," Credit Suisse analysts Christian Buss, Sara Shuler, and Pallavi Bakshi said.
Analysts at Wedbush maintained their "outperform" rating and $80 price target on the stock.
Eastbay, the company's performance sports footwear online division, saw less traffic to its website, leading the segment to increase its promotional offers, which decreased the merchandising margin of the direct to consumer business.
"Turning to EastBay, a big factor in that banner's recent struggles continues to be the overall shift in style preferences away from performance oriented products to more athletic lifestyle assortments," the company said during its earnings call.
Foot Locker still wants EastBay to succeed, though, and recently hired a new leader for its digital business.
The company's direct to consumer sales accounted for 12.8% of Foot Locker's overall sales, up from 12.4% in the year ago period.
A bright spot for the company was its apparel business, due in part to an uptick in the apparel's average selling price.
"We are making progress in our apparel business. Overall apparel profitability is up to the point where margins are close to catching up to the already strong footwear margins," the company said.
For the fourth quarter and fiscal year, Foot Locker expects to see mid single-digit comparable store sales growth. Wall Street is expecting the company to report full year sales growth of 4.3%
Year to date, Foot Locker sales are up 4.6% year over year to $5.65 billion from $5.41 billion, while comparable store sales have increased 4% year over year.
Earlier this week, Foot Locker declared a quarterly dividend of $0.28 per share payable January 27 to shareholders of record on January 13.