Shares of Foot Locker (NYSE:FL) soared in trading, even though the specialty athletic retailer’s adjusted earnings declined by 68.6% to $0.22 per share in Q1. However, this was above the consensus estimate of $0.12 per share.
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The retailer’s sales declined by 2% year-over-year, with revenue hitting $1.87 billion. Analysts were expecting sales of $1.88 billion. Foot Locker’s comparable sales fell by 1.8% during the first quarter, which was still far better than analysts’ expectations of a 3.1% decline.
Foot Locker’s Turnaround Plan Seems to Be Working
Foot Locker has been contending with falling sales for the past few quarters as consumers pull back on spending amid inflationary pressures. However, the company has been working on a turnaround under CEO Mary Dillon, who has been revamping Foot Locker’s stores, which account for 80% of annual sales, by building new off-mall locations, closing underperforming stores, and refreshing existing ones.
This strategy seems to be finally paying off, as Dillon told CNBC that the company’s average selling price rose in the first quarter, indicating that consumers were “willing to pay full price for the right product.”
FL’s FY24 Outlook
Looking forward, management reaffirmed its FY24 guidance and expects sales to either decline by 1% year-over-year or increase by 1% while comparable sales are likely to increase in the range of 1% to 3%. The retailer has projected adjusted earnings to be between $1.5 and $1.70 per share. For reference, analysts were estimating earnings of $1.57 per share.
Is FL a Good Stock to Buy?
Analysts remain sidelined about FL stock, with a Hold consensus rating based on three Buys, 11 Holds, and four Sells. Over the past year, FL has increased by more than 10%, and the average FL price target of $24.25 implies a downside potential of 17.2% from current levels. These analyst ratings are likely to change following FL’s Q1 results today.
