Shares of Foot Locker (NYSE:FL) jumped 30% at the open on Thursday as the company reported a first-quarter adjusted EPS of $0.22, surpassing the analyst estimates by $0.09.
However, revenue fell slightly short of expectations at $1.87 billion against a consensus of $1.89 billion. The New York-based athletic retailer also reaffirmed its full-year 2024 adjusted EPS guidance of $1.50-$1.70, aligning with the midpoint above the analyst consensus of $1.57.
Foot Locker's first-quarter results showcased a solid start to the year, with President and CEO Mary Dillon crediting the company's "Lace Up" plan for the performance.
Despite total sales dipping by 2.8% from the same quarter last year and comparable sales decreasing by 1.8%, the company managed to increase global Foot Locker and Kids Foot Locker comparable sales by 1.1%. Dillon highlighted the company's disciplined expense management and favorable shifts in expense timing as key factors contributing to the earnings outperformance.
The retailer's gross margin declined by 120 basis points compared to the prior-year period. Inventory levels were 5.6% lower than at the end of the first quarter last year, indicating a leaner inventory position.
Dillon expressed confidence in the "Lace Up" plan, which focuses on strengthening brand partnerships, enhancing customer engagement, and solidifying Foot Locker's position in sneaker culture. She also noted the company's investment in store refreshes and the introduction of a new retail concept, with more openings planned for the year.
Looking ahead, Foot Locker's full-year 2024 outlook includes a non-recurring charge related to the rollout of its enhanced FLX loyalty program in North America. Despite this anticipated charge, the company's guidance remains steady, suggesting a positive outlook for the remainder of the year.
Following the report, analysts at Telsey said expectations for Foot Locker were low heading into the 1Q24 print, and the company was able to exceed comp, gross margin, and EPS forecasts.
However, they added: "The result still shows challenges at Foot Locker compared with sporting goods retailers like Dick's (DKS; Outperform; PT=$255), with a comp of (1.8%) vs. Dick's +5.3% and operating margin contraction of 348 to 1.7% vs. Dick's contraction of ~50 bps to 11.0%."