Why Foot Locker Stock Popped Today

What happened

Shares of Foot Locker (FL 8.73%) popped today after the sneaker retailer posted better-than-expected results in its third-quarter earnings report and raised its guidance.

The stock closed up 8.7% on the news after trading up as much as 18% on Friday morning. 

So what

Comparable sales ticked up 0.8% in the quarter, and overall revenue slipped by 0.7% to $2.17 billion, but that was better than estimates of $2.09 billion.

Gross margin in the quarter fell 270 basis points as, like other retailers, the company faced higher-than-normal markdowns and increased supply chain costs. On the bottom line, the company reported adjusted earnings per share of $1.27, which was down from $1.74 in the year-ago quarter, but that still beat the consensus of $1.11.

CEO Mary Dillon, who came to the company from Ulta Beauty, said, “Foot Locker’s solid third quarter results in the midst of ongoing macroeconomic challenges are a testament to the strengths of this organization that I am honored to now be leading. Despite the tough environment, our expanding customer base remained resilient, and I’m proud that our team delivered sales above our expectations, thanks to their exceptional execution.”

Now what

Foot Locker also raised its guidance, showing signs of strength in a difficult environment. It now sees adjusted earnings per share of $4.42 to $4.50, up from $4.25 to $4.45, and it also raised its full-year comparable sales outlook to a decline of 4% to 5%. For the fourth quarter, it expects a comparable sales decline of 6% to 8% and adjusted EPS of $0.45 to $0.53.

While those numbers show the weakness in the retail industry, the guidance hike was good enough to please investors, especially for a stock trading at a price-to-earnings ratio of just 8.