8. Foot Locker, Inc. (NYSE:FL)
Number of Hedge Fund Holders: 27
Foot Locker, Inc. (NYSE:FL) is a global retailer specializing in footwear and apparel. It operates various brands, including Foot Locker, Kids Foot Locker, Champs Sports, WSS, and atmos. Customers can shop at physical stores, online, or through mobile apps. The company has been around since 1879 and is headquartered in New York City.
The company reported a 2.4% increase in total comparable sales for the quarter, driven by share gains in the global Foot Locker and Kid Foot Locker banners, which saw a 2.8% rise. Champs Sports and WSS also returned to positive growth, with increases of 2.8% and 1.8%, respectively, driven by strong back-to-school performance.
Foot Locker, Inc.’s (NYSE:FL) gross margin also improved by 230 basis points year-over-year. This was primarily driven by a recovery in merchandise margins compared to the higher promotional activity of the prior year. Meanwhile, Foot Locker, Inc.’s (NYSE:FL) digital sales penetration increased by 60 basis points year-over-year, reaching 17.6% of total sales for the quarter. The company is on track to achieve its target of approximately 25% e-commerce penetration by 2026.
Foot Locker, Inc. (NYSE:FL) has also made progress in its partnership with Nike over the past few quarters. The company has a long-standing relationship with Elliott Hill. Ongoing collaborations include the expansion of their work with Nike and Jordan Brand on the clinic and the Foot Locker Home Court basketball experience. In the short term, the company is on track to return to growth with Nike in the fourth quarter, supported by a strong launch calendar compared to both the third quarter and the same period last year.
Jim Cramer also displayed confidence in the company’s long-term prospects in September. Here’s what he said:
“Second down retailer hits too close to home. I’m talking about Foot Locker. As a former holding of the Charitable Trust, we bailed on in June. Absolute numbers here were not as strong as ANF’s. Foot Locker still firmly in turnaround mode under new CEO Mary Dillon. I should say relatively new, but they were still better than expected across the board.
“I actually like the quarter. After five quarters of same-store sale shrinkage, Foot Locker returned to growth, up 2.6%. Handily beat the expectations. That should have been enough to keep the stock a little bit higher. Gross margins expanded. That should have been enough. Inventories decreased by 10%. That should have been enough. And they only lost 5 cents per share when Wall Street expected a 7-cent loss. But they still lost money.
“How come the stock lost 10%? Well, first, the stock came into the quarter again, like some of these others, very hot, up 45% from the last time the company reported in May. Second, I think the sellers are basically saying that they don’t believe Foot Locker can make its full-year forecast because they’ll need a couple of strong quarters to make the numbers, especially on the earnings front.
“But having listened to the conference call, management laid out some major positives. Most important of all, Foot Locker’s relationship with Nike seems to have improved substantially. Nike needs them more than Nike thought. That’s very important. It ain’t just old DTC at the end of the day.
Foot Locker’s a turnaround story. It’s going to take at least a couple more quarters to unfold, but it’s going to unfold. Stock may have gotten ahead of itself over the summer, one reason why we sold it for the Charitable Trust, but if you have a longer-term view, I think this is a viable dip.”
