Foot Locker Inc. ran fast in its second quarter, with earnings that far exceeded expectations and said it is “cautiously optimistic” about its outlook for the second half of the year.
The athletic footwear giant reported that its net income totaled $430 million, or $4.09 per share, for the quarter ended July 30, up from $45 million, or $0.43 per share, in the year-ago period. Adjusted earnings per share of $2.21 crushed analysts’ expectations of $1.01.
Sales rose 9.5% to $2.28 billion from $2.077 billion, beating estimates of $2.09 billion. Same-store sales rose 6.9%.
In a statement, Foot Locker CEO Richard Johnson said the company saw strong results in its women's and kids' footwear business along with broad demand for apparel and accessories, which combined with more limited promotional activity, led to the “outstanding top and bottom-line results."
In May, Foot Locker reported a strong first quarter and announced plans to reposition its store fleet. The retailer said it planned to convert approximately one-third of its 231 Footaction stores to its other existing banners this year
Earlier this month, Foot Locker announced it was buying two retail chains — Atmos, a digitally-led, hot streetwear brand based in Japan, and California-based WSS — for a total of $1.1 billion
as its looks to grow its footprint beyond malls and accelerate its expansion in Asia and the premium fashion sneaker market. The acquisitions are expected to close late in the third quarter.
Foot Locker said that many of the trends it saw in the first quarter continued into the second quarter. The combination of robust demand and fresh and lean inventory drove meaningfully lower levels of promotional activity, resulting in a gross margin of 35.1%, compared to the 25.9% in the prior year period, said Foot Locker CFO Andrew Page.
The company's total cash position, net of debt, at the end of the second quarter was $1.73 billion million, higher than the same period last year by $484 million. During the quarter, Foot Locker spent $8 million to repurchase 125,000 shares, returning a total of $29 million to shareholders through its share repurchase program and dividends.
In addition, it invested $36 million in its store fleet, digital capabilities, supply chain and other infrastructure.
"Our approach to capital allocation remains focused on investing in growth opportunities while also returning cash to shareholders through our quarterly dividend and opportunistic share repurchase program," said Richard Johnson. "The 50% increase to our quarterly dividend rate that we announced earlier this week reflects our board's confidence in our business and financial strength."
Added Page, "We exited the quarter with positive momentum and are cautiously optimistic about the outlook for the back-half of 2021. Recognizing we are still operating in an uncertain environment due to COVID-19, we continue to keep a close eye on the business, including temporary store closures and supply chain challenges, and we remain disciplined with expense management."
During the second quarter, Foot Locker opened 16 new stores, remodeled or relocated 23 stores, and closed 57 stores. As of July 31, 2021, the company operated 2,911 stores in 27 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 134 franchised Foot Locker stores were operating in the Middle East.