Not every retailer is suffering in this anemic recovery. Foot Locker (FL) stock is hitting all-time highs thanks to record sales and profits in the latest quarter.
Athletic footwear and apparel has been a favorite of fickle fashionistas for the past couple of years. Indeed, apart from the whole athletic wear and yoga look, few fashion trends have caught on recently — and the apparel and footwear industries would be wheezing without the help.
Sales of athletic wear grew 7% in 2012 and another 13% last year, according to market researcher NPD Group. Take those sales out of the mix, and total apparel sales actually declined over the last two years.
Joblessness, job insecurity and stagnant wages are making time tough for retailers across the price spectrum, but they’ve left companies like Foot Locker, Nike (NKE) and Under Armour (UA) largely untouched. And the market has definitely noticed.
Foot Locker stock is up 30% for the year-to-date, which extends a long run of serious outperformance. Heck, since the market bottomed out five years ago, Foot Locker stock gained nearly 450%. The S&P 500 is up about 160% over the same span.
Foot Locker Stock: More Upside to Come
FL stock can count on even more gains if it keeps building on success as it did last quarter. For the most recent period, Foot Locker income rose to $92 million, per 63 cents a share, from from $66 million, or 44 cents per share, in last year’s second quarter.
Excluding charges (as analysts do), Foot Locker earnings came to 64 cents per share to beat Wall Street’s estimate by a dime.
That’s a big beat.
Revenue rose 13% to $1.64 billion, or 12% after adjusting for foreign currency exchange. Either way, the top line likewise eclipsed Street estimates. Analysts were looking for revenue of $1.57 billion in the quarter.
Meanwhile, same-store sales rose a robust 7%. Same-store sales, which exclude receipts from newly opened of closed locations, are considered a key measure of a retailer’s health. Analysts projected Foot Locker same-store sales to rise 5.4%
Perhaps the best indication of Foot Locker’s health is that it’s putting up double-digit sales gains despite having so many locations situated in malls, where customer traffic is dwindling.
Analysts credit Foot Locker’s ongoing success to focusing on running shoes — the most popular item in athletic footwear — as well as remodeling stores and closing weak locations.
Most importantly for new money, Foot Locker still looks like a buy. Shares go for 14.5 times forward earnings (P/E), which is fair enough for a stock with a long-term growth rate of about 11%.
No, Foot Locker stock isn’t on sale, but neither is it overpriced. As long as the stores keep up their top- and bottom-line momentum, Foot Locker stock will go along for the run.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
