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Athletic retail giant Foot Locker (FL) slam-dunked its way through quarterly earnings season today when it reported fourth-quarter earnings that beat analysts’ expectations. But is this enough to warrant a buy recommendation for Foot Locker stock from me? Find out now.
Foot Locker operates as both a retailer of footwear and apparel in more than 20 countries worldwide, with 3,473 stores and counting. Foot Locker brings its customers the leading brands in athletic gear and apparel, and has various segments targeted toward specific demographics, including Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction and CCS, a skater-themed store geared toward 12-18 year olds.
Foot Locker handily beat analysts’ Q4 sales and earnings expectations. The footwear retailer reported net income of $122 million, or $0.82 per share, on $1.79 billion in sales. Compared with Q4 2012 this represents 16% annual bottom-line growth and nearly 5% top-line growth. Analysts had forecast earnings of $0.76 per share on $1.76 billion in sales so Foot Locker posted an 8% earnings surprise and a 2% sales surprise.
Looking ahead to full-year 2014, Foot Locker expects generate single-digit same-store sales growth and double-digit earnings growth. The company has been revamping its brand through store remodels and by expanding its retail footprint in Europe.
Foot locker has launched a $220 million capital spending program to help fund some of these efforts in 2014. The Board also recently authorized a 10% increase to its quarterly dividend. FL goes ex-dividend on April 15 and shareholders of record will receive 22 cents per share on May 2.
Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. For the past 12 months, Foot Locker stock has been fluctuating between hold and sell territory. At time of writing this, FL receives a D for its Quantitative Grade and a C for its Fundamental Grade.
Breaking down the company’s fundamentals, Foot Locker earns Cs on five of the eight metrics, including sales and earnings growth as well as its track record of earning surprises.
Meanwhile FL is doing well with its cash flow (B) and return on equity (A).
Bottom Line: As of this posting I consider Foot Locker stock a C-rated Hold. While these results were solid, I’m going to need to plug in the latest data to see whether it’s enough to upgrade the stock to a buy.