Foot Locker Scores a Slam Dunk
May 24th 2012 11:41AM
Updated May 24th 2012 3:30PM
Innovative colors and new materials used in footwear and apparel products seem to have added the necessary spark to sales as retailer Foot Locker (NYS: FL) recorded the "highest quarterly earnings the company has ever achieved." Earnings per share (EPS) soared a staggering 38% to $0.83 from $0.60 in the year-ago period. As Foot Locker's results trampled Wall Street's expectations, its shares popped as much as 14% during intraday trading.
Weathering the storm
This was a good quarter overall for sports apparel retailers. Peer Dick's Sporting Goods (NYS: DKS) saw its first-quarter profits jump by 53%, helped by a rise in its online sales, as well as more demand at its Golf Galaxy stores. Competitor Hibbett Sports (NAS: HIBB) recorded its 10th straight quarter of increasing same-store sales. Its first-quarter EPS rose by an impressive 29%.
The weather was one factor that surely worked in their favor, as a rise in temperatures helped push up sales of summer products. The CEO of Dick's, in fact, said that as a result of the weather, "People were playing golf earlier this year, they were fishing earlier this year."
Locker room talk
Foot Locker's revenue rose by 9% for the quarter, with same-store sales rising by 9.7%. Sales were helped by the strong performance of its key basketball business, with shoes named after star players such as LeBron James, Kobe Bryant, and Kevin Durant selling "exceptionally well," according to CEO Kenneth Hicks. The retailer's Retro Jordan products also sold out almost as soon as they were released.
As I was saying, this was a truly colorful quarter for Foot Locker. Converse contributed to a large portion of Foot Locker's performance this quarter, and as the shoemaker experimented with colors, shoppers apparently gobbled them up. Indeed, color added to sales across brands housed by Foot Locker. CEO Hicks said, "our vendors put color into these players' shoes and our customers snap them up ... color was a consistent theme throughout all of our categories and we expect it to continue to be so in the future." As shoemakers continue innovating with their styles and colors, we can expect sales to continue rising.
An exciting buildup
The coming few months should also help Foot Locker build on the sales momentum gained this quarter. This is because two big sporting events are around the corner: the London Olympics and the European Soccer Championship. These two events should help create awareness for various products and may help send consumers to Foot Locker (and its peers). The retailer also spent more on marketing efforts during this quarter, which should hold it in good stead in the future.
To stay up to speed on Foot Locker as it looks to continue the positive momentum gained during this quarter, click here to add it to your free stock watchlist.
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At the time this article was published Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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