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Why Foot Locker, Inc. Shares Got Tripped Up Today

What happened

Shares of sneaker maven Foot Locker, Inc.  (NYSE: FL  ) were taking a spill today after the retailer posted disappointing results in its first-quarter earnings report.

As of 11:34 a.m. EDT, the stock was down 15.2%.

A group of runners' feet meeting in the center of a circle

Image source: Getty Images.

So what

Foot Locker had been one of the best performers in the retail sector in recent years as the company rode the athleisure wave and benefited from an exclusive partnership with Nike Inc., but that may be changing as sportswear sales appear to be slowing.

Comparable sales increased 0.5% in the quarter, overcoming a decline in the low teens in February, which management blamed on delay in tax refunds, an excuse many other retailers offered for weak sales in February. Overall sales ticked up 0.7% to $2 billion, below estimates at $2.02 billion. On the bottom line, earnings per share fell from $1.39 to $1.36 as inventory outgrew sales, cramping margins. Wall Street had expected earnings at $1.38 per share. 

CEO Richard Johnson acknowledged the performance fell "short of original expectations." 

He added, "We are confident that our customers have not lost their tremendous appetite for athletic footwear and apparel and that our position in the industry is stronger than ever."

Now what

Foot Locker's sell-off follows a similar move by Dick's Sporting Goods earlier this week as the leading sporting-goods retailer also reported weaker sales than expected. Meanwhile, Under Armour stock is trading near three-year lows after its growth slowed suddenly.

Foot Locker seems to be in better shape than its peers and is looking cheap at a P/E of 12 after today's sell-off. If management's assertion that tax refund delays were to blame for the weak quarter is correct, the stock should bounce back over the remainder of the year.

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5/25/2017 4:01 PM
FL $59.66 Up +0.03 +0.05%
Foot Locker CAPS Rating: ***

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