“Q2 is no layup” for athletic specialty retail giant Foot Locker Inc., says UBS Investment Bank analyst Michael Binetti.
While Wall Street beats had become the norm for Foot Locker Inc., following an in-line Q1, analysts say they’re now expecting a more tame second-quarter performance when the company reports earnings before the market open Friday.
“We expect Foot Locker to report generally in-line Q2 results,” Canaccord Genuity Inc. analyst Camilo Lyon wrote on Aug. 15, reiterating a buy rating on the stock. “Despite the slow start to the quarter (negative Q2 [quarter-to-date] comp in May largely impacted by a timing shift of a significant Jordan launch), we believe demand trends improved as the quarter progressed.”
Lyon said improvements throughout the second quarter were likely driven by the Curry 2.5 launch as well as an increased allocation of Adidas product.
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Meanwhile, Binetti points out that although Q2 is Foot Locker’s toughest same-store sales comparison in 2016 — against a 9.6 percent gain in the comparable period — he thinks same-store sales can still accelerate slightly compared with Q1.
“We’re forecasting a 3.5 percent [comp gain] versus 2.9 percent in Q1 based on [several factors, including] Sportscan [data, which showed that] total athletic footwear accelerated to 11 percent in Q2 versus 8 percent in Q1 [and that] basketball accelerated to [gains of] 9 percent in Q2 from 5 percent in Q1,” Binetti writes. “[And we believe] that Foot Locker was able to sequentially improve inventories in Q2 to address a consumer shift to casual/classic styles away from basketball — which should reduce a [near term] same-store sales headwind.”
Consensus estimates predict that Foot Locker’s Q2 diluted earnings per share will gain 6 cents year-over-year, to 90 cents, and revenues will climb 4 percent, to $1.76 billion.
Binetti and Lyon agree that the setup into Q3 looks stronger — with Binetti pointing to a possible beat and raise scenario.
