Struggling sportswear and footwear retailer Foot Locker (NYSE:FL) may have just received a lifeline. Reportedly, the company is naming retail industry veteran Mary Dillon as CEO. Adding to the enthusiasm, Foot Locker also beat earnings estimates for the fiscal second quarter. Now, FL stock is climbing higher by 20%.
Perhaps best known for helming personal care and beauty specialist Ulta Beauty (NASDAQ:ULTA), Dillon will replace Richard Johnson in the executive role. According to Bloomberg, Dillon will also become a member of the company’s board. Both of these appointments will become active on Sept. 1.
Evercore ISI analyst Warren Cheng and others see this appointment as a big positive for FL stock. Cheng characterized Dillon as one of Wall Street’s “beloved” figures. Her joining Foot Locker symbolizes a “huge win” for the company.
This executive change isn’t the only upside catalyst for shares. In Q2, Foot Locker also reported adjusted earnings per share (EPS) of $1.10. This figure slipped 50% from the year-ago quarter but beat the consensus EPS target of 81 cents. On the top line, Foot Locker’s group revenue dropped 9% to $2.065 billion, barely missing the analyst estimate of $2.07 billion. Notably, same-store sales fell 10.3% as well.
All Eyes on Dillon as FL Stock Looks to the Future
Another interesting point to bring up about Foot Locker’s fiscal Q2 is the guidance. Management now forecasts fiscal 2022 profits of between $4.25 and $4.45 per share, according to The Street. This latest guidance dipped down 15 cents from the higher end of prior guidance. Nevertheless, that apparently matters none for FL stock.
Rather, all eyes are now focused on Dillon’s appointment as CEO and what that might entail for this otherwise struggling business. Bank of America analysts recently upgraded their rating on shares to “neutral” from “underperform.” They view the coming transition as a “thesis-changing move” because of Dillon’s huge reputation.
Foot Locker executives recently weighed in on the company’s broader financial performance as well. CFO Andrew Page had the following to say:
“Following our solid results for the second quarter, against record results last year, we remain confident in our ability to achieve earnings within our original guidance range […] But recognizing that the back half will likely see more pressure than we originally anticipated, we now expect to be at the lower end.”
Fortunately, Mary Dillon has decades of experience working for and running top consumer companies. A highlight of the executive’s time at Ulta involved placing branded shops in Target (NYSE:TGT) stores. Dillon has led global marketing initiatives for McDonald’s (NYSE:MCD) as well.
Why It Matters
Moving forward, incoming CEO Mary Dillon may have to address Foot Locker’s overdependency issues. For example, the retailer relies on Nike (NYSE:NKE) for around 60% of annual sales. NKE stock is slipping 2% today and is down more than 30% for the year.
One positive for FL stock? Today’s double-digit gains are occurring amid red ink in the major equity indices.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.