Source: Company reports

2Q16 RESULTS

Foot Locker’s 2Q16 revenues were $1.78 billion, up 5.0% from the year-ago quarter and above the consensus estimate. Excluding the effect of foreign currency, sales increased 5.4% for the quarter. Same-store sales rose 4.7%, topping expectations and improving over the prior three-month period.

Business Divisions

Foot Locker Canada lead store divisions, followed closely by Champs Sports, both with low double-digit comp gains driven by gains in footwear, apparel and accessories. Foot Locker U.S. posted mid-single-digit comp gains, despite a negative 100 basis point impact from its NY flagship store being closed for renovations during the quarter. Foot Locker Europe, Foot Locker Asia Pacific and Footaction posted mid-single digit comps as well. The Kids Foot Locker contributed to positive comps, up low single-digits in the second quarter. With the net addition of 26 stores, total sales were up almost 10%. Lady Foot Locker comps lagged, down low mid-single digits.

Category

For the total company, footwear continues to lead gains, with overall gain up in the high mid-single-digit range. Within footwear, running and basketball were up mid-single digits. Men’s apparel, the largest piece of the apparel business, was up mid-single-digits, following by kid’s apparel up double digits. The gross was 33.0% in 2Q 2016, up 40 basis points from the year-ago quarter. The gains were driven by lower markdowns in stores, partially offset by a decline in the merchandise margin from its direct-to-customer business. SG&A expense rate increased to 19.7% from 19.5% in the year-ago period. Foot Locker spent more to drive traffic to its website. Overall, management was pleased with expense control during the quarter, especially store wages. EPS was $1.39 per share, in line with the consensus estimate and up 7.0% from the year-ago quarter. These results were achieved despite rapidly shifting category preferences by customers, and the company highlighted the work it had done to build leadership positions across channels, geographies, banners and product categories. At the end of the quarter, inventories were $1.3 billion, up 2.1% year over year. Management commented that it continues to manage the business tightly in terms of inventory, occupancy expense and wages, and that it expects to achieve a mid-single-digit comparable sales gain and a double-digit EPS increase in 2016. Direct-to-consumer comps were up 7.1%, driven by digital sales in the U.S, Europe and Canada. During the second quarter, Foot Locker opened 23 new stores, remodeled or relocated 64 stores and closed 18 stores. 2Q16 RESULTS Ross Stores reported 2Q16 EPS of $0.71 and beat the consensus estimate of $0.67 and was up 13% from last year.