Foot Locker (FL) Pops on Beat-and-raise and Positive Commentary, Results Will Help Improve Stock Sentiment Says UBS

Shares of Foot Locker (NYSE: FL) are up in premarket trading Friday after the company said it expects sales and EPS to be at the top of its forecast range.

FL reported Q1 adjusted EPS of $1.60, compared to $1.96 in the year-ago period and above the consensus estimates of $1.53 per share. Sales came in at $2.18 billion, up 1% YoY and almost in line with the expected $2.19 billion.

Foot Locker reported a total location count of 2,815 in the period, down 4.6% YoY and below the analyst consensus of 2,834. The number of U.S. stores was 786 in the period, also below the consensus projection of 793.

Comparable sales were down 1.9% in Q1, up 80.3% YoY and below analysts' expectations of 3.52%.

“Following our solid results from the first quarter, our strong inventory position going into the remainder of the year, and our strengthening vendor relationships, based on our current visibility, we now expect to achieve the upper end of our revenue and earnings guidance for the full year,” said CFO Andrew Page.

Goldman analyst Kate McShane maintained a Neutral rating and a $31.00 per share price target.

“We think the better gross margin outlook in the face of higher cost inflation and the potential for more markdowns across the industry is significantly better than expected,” McShane said.

UBS analyst Jay Sole believes the results will help improve the sentiment on the stock.

“Our conversations with investors before the print suggested sentiment is very low on FL. Over its 4Q21 print, FL's stock price dropped 30% on a day when the S&P 500 increased 2%. The key was well-below-consensus FY22 guidance and FL's announcement of Nike's decision to accelerate its strategic shift to its DTC channel. Our conversations with investors suggested this created a "capitulation" moment for the stock. We think FL's 1Q22 beat & raise report will surprise the market since expectations for FL had dropped to very low levels,” Sole said.

By Senad Karaahmetovic

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