Shares of Foot Locker Continue to Trail After a Disappointing Earnings Report

The company’s shares are down 27% from a year earlier.

On Monday, shares of Foot Locker reached a new 52-week low on the heels of a disappointing earnings report. The company’s shares and down nearly 35% year to date, though most of these losses occurred in the last three months. 

This caused a Susquehanna Financial analyst to downgrade the company from positive to neutral. In a note to clients, the analyst stated that Foot Locker is dealing with “some internal focus and execution issues.”

However, it’s not all bad news for Foot Locker since the company reported that business is picking up. So could the company’s low price point provide an attractive entry for new investors? 

Maybe, but maybe not. Here are three things you should know before buying shares of Foot Locker.

The company’s revenue and earnings fell during Q2

According to forecasted results, Foot Locker should have reported earnings of 67 cents per share and $1.823 billion in revenue. Instead, the company reported 66 cents per share in earnings and $1.774 billion in revenue. This caused the company’s stock to fall more than 18% last week.

Same-store sales did grow during the second quarter, but not as much as investors were hoping. Foot Locker reported same-store sales growth of 0.8%, instead of the forecasted 3.3%.  

Sporting goods stores are struggling in general

Many of the challenges Foot Locker experienced during the second quarter have been felt by all sporting goods stores to one degree or another. In recent years, the demand for athletic products has increased but so has the availability of online retailers. 

And consumers tend to prefer companies like Lululemon, Nike, and Adidas. All of this caused revenue at sporting goods and apparel stores to continue to drop. 

Previously, Foot Locker stood out as an exception to this rule. The company reported strong same-store growth during the first quarter, which is partly what made its latest results so disappointing. It’s unclear whether this is a fluke or a sign of an ongoing trend. 

Company executives maintained a positive outlook

In spite of the disappointing results, management seemed hopeful that the company can still finish out the rest of the year on a strong note. CEO Richard Johnson said that the company’s sales have already started to pick up. 

The company also expects to see stronger numbers during back-to-school season. And in fairness, the drop in revenue was mostly due to poor foreign currency exchange rates. 

Foot Locker’s digital sales are also up 6.5% from a year earlier, providing one bright spot for the company. All in all, the company maintained its outlook for the remainder of 2019.