Shoes and clothes need replacement on a consistent basis, even more so for the sportswear segment as these are more subjected to wear and tear. And to top that, kids’ shoes and apparels need the most replacement as kids grow very fast (trust me!) and the older stuff no longer fits their body. So it is clear that the sportswear business has a recurring nature poised to grow in good times and bad.
People today are getting more health conscience and the global sportswear industry is expected to generate additional $55 billion in new sales by 2017 so I guess it wouldn’t hurt to look for companies in this segment which promise a steady and positive growth over the long term.
Robust same-stores sales growth and improving margins.
One feature which particularly interests me is Foot Locker, Inc. (NYSE:FL)’s steady same-stores sales growth. Management pays special attention to the under-performing stores and fast decisions are made as to whether they need to be renovated or closed.
For the latest quarter, 25 new stores were opened, 64 were renovated/relocated and 39 poor performing stores were closed and management plans to close 88 stores this quarter making way for 73 new stores. This close monitoring led revenue for fiscal 2012 rise 10% aided by the 9.4% same-stores sales growth. It’s a huge positive for retail investors as it is important in the retail industry that the non-performing stores shouldn’t burden the top-line growth.
Here’s a brief from the company’s annual 10-K filings.
| Square Footage | ||||||||||||||||||||||||||||
| January 28, 2012 | Opened | Closed | February 2, 2013 | Relocations/Remodels | (in thousands) | |||||||||||||||||||||||
| Selling | Gross | |||||||||||||||||||||||||||
| Foot Locker US | 1,118 | 9 | 55 | 1,072 | 58 | 2,515 | 4,311 | |||||||||||||||||||||
| Foot Locker Europe | 561 | 39 | 10 | 590 | 41 | 808 | 1,770 | |||||||||||||||||||||
| Foot Locker Canada | 129 | 2 | 2 | 129 | 9 | 264 | 406 | |||||||||||||||||||||
| Foot Locker Asia Pacific | 91 | 3 | 2 | 92 | 5 | 128 | 206 | |||||||||||||||||||||
| Lady Foot Locker | 331 | 1 | 29 | 303 | 17 | 398 | 685 | |||||||||||||||||||||
| Kids Foot Locker | 291 | 18 | 4 | 305 | 13 | 421 | 727 | |||||||||||||||||||||
| Footaction | 292 | 1 | 10 | 283 | 18 | 817 | 1,299 | |||||||||||||||||||||
| Champs Sports | 534 | 12 | 7 | 539 | 37 | 1,876 | 2,861 | |||||||||||||||||||||
| CCS | 22 | — | — | 22 | — | 34 | 51 | |||||||||||||||||||||
| Total | 3,369 | 85 | 119 | 3,335 | 198 | 7,261 | 12,316 | |||||||||||||||||||||
The company’s profitability is one the rise with EBIT increasing an impressive 130% on the back of 20.83% rise in revenue during the 2010-2012 period and the gross, operating and net margin all are above the five-year average.
| 2012 | 2011 | 2010 | Long-term Objectives | ||||||||||||||||
| Sales (in millions) (1) | $ | 6,101 | $ | 5,623 | $ | 5,049 | $ | 7,500 | |||||||||||
| Sales per gross square foot | $ | 443 | $ | 406 | 360 | $ | 500 | ||||||||||||
| EBIT margin (1) | 9.9 | % | 7.9 | % | 5.4 | % | 11.0 | % | |||||||||||
| Net income margin (1) | 6.2 | % | 5.0 | % | 3.4 | % | 7.0 | % | |||||||||||
| ROIC (1) | 14.2 | % | 11.8 | % | 8.3 | % | 14.0 | % | |||||||||||
| TTM | 5 Year Average | ||||||||||||||||||
| Gross Margin | 44% | 42.6% | |||||||||||||||||
| Operating Margin | 10.2% | 5.8% | |||||||||||||||||
| Net Margin | 6.5% | 2.8% | |||||||||||||||||
Going strong in Europe
Foot Locker, Inc. (NYSE:FL) recently agreed to buy German athletic chain Runners Point for $94 million to strengthen its foothold in Europe. Runners Point operates over 200 stores throughout Germany and other European nations along with an online subsidiary, Tredex and recorded recorded sales of $254 million in 2012. Foot Locker, Inc. (NYSE:FL) aims to capitalize on Tradex’s strong digital presence to accelerate growth in its own developing e-commerce business in Europe.
