Foot Locker Sees Profit Rising For Third Consecutive Year

Date : 03/02/2012 @ 12:36PM
Source : Dow Jones News
Stock : Nike, Inc. (NKE)
Quote : 59.95  0.85 (1.44%) @ 4:54PM

Foot Locker Sees Profit Rising For Third Consecutive Year

Foot Locker (NYSE:FL)
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Foot Locker Inc. (FL) expects profit to rise at least 10% this year and for each individual quarter, as the athletic retail chain sees same-store sales increasing across all divisions.

The projected growth would build on Foot Locker's two-year streak of profit improvement as new product launches drive demand for running, basketball and lifestyle gear. Foot Locker, which posted fiscal results late Thursday, also intends to open 82 new stores and close 75 in 2012, the first time in "many years" that the company opened more stores than it closed.

Footwear makers like Nike Inc. (NKE) are in the midst of a strong athletic footwear cycle that has driven sales the past two years, and which analysts say typically occurs over a span of three to five years. New styles, colors and materials are being used in athletic gear, which helps drive consumers to the retail chains that sell those wares.

Chief Financial Officer Lauren Peters told analysts during the company's conference call on Friday the projected profit growth this year wasn't dependent on a roughly 10-cent benefit in the fiscal fourth-quarter as a result of the new year being a week longer than the last period.

Analysts surveyed by Thomson Reuters expected profit growth for the four quarters in the new fiscal year to range between 12% to 16%.

Peters conceded Europe has gotten off to a rough start this year, attributing weakness there to bad weather, which has led to some store closures.

"We remain optimistic for the current year with new products, expanded assortments that are selling well and major sporting events taking place in Europe, all likely to support our business," said Peters.

She added the company's lean inventory position enables Foot Locker to maintain a steady flow of new products from Nike, Adidas AG (ADDYY, ADS.XE), Under Armour Inc. (UA) and others.

A day earlier, Foot Locker reported its fiscal fourth-quarter profit rose 42% as innovative apparel and footwear merchandise led to stronger consumer demand, helping the company report higher same-store sales and expanding margins.

Peters told analysts on Friday that fourth-quarter same-store sales increased across all regions, led by evenly strong growth in the U.S., Canada and Asia Pacific. She said Europe's gain was only "slightly positive" as consumers in that region--especially the targeted young customers--continued to be challenged by a weak economy and high unemployment. Still, Foot Locker's total European sales were up in the mid single-digits on a percentage basis.

Within the footwear category, men's and kids notched growth while the women's business was flat. Apparel sales were higher and Peters said by improving the apparel assortments and in-store displays, Foot Locker is finding it can sell both more apparel and more shoes.

Chief Executive Ken Hicks said Foot Locker has taken "meaningful steps to elevate our private label apparel," and as a result, is seeing a better response on the women's side of the business and for Champs Sports gear.

"We are still learning and developing this business and we have opportunities to improve in many areas," added Hicks.

Foot Locker is testing new store formats at Champs and designing a new format for Foot Locker in the U.S. The company also opened its first locker room store in the United Kingdom in the fourth quarter, a concept that focuses more on performance than fashion. The store is near some venues that will be used for the summer Olympics later this year.

Though the fourth-quarter results exceeded expectations, Foot Locker's shares slid 1.1% to $29.20 in recent trading as there may have been expectations same-store sales would have risen even higher than the reported 7.5% increase. Still, the stock is trading at levels last seen in 2005.

--By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

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