Foot Locker Inc. (FL) is back on its feet and is leaping higher on Wednesday after posting third-quarter results that were better than expected.
Foot Locker's surged about 15% in pre-market hours Wednesday after falling 5.5% on Tuesday as it bucked a trend of retailers sliding on even positive earnings releases.
The shoe and apparel retailer reported earnings of $0.95 a share, which was $0.03 a share more than analysts expected, and barely cleared the bar on revenue. The vendor also raised its margins and crushed expectations on same-store sales.
"We saw our comparable sales accelerate nicely as we moved through the quarter with August up low single digits followed by mid-single digit comp gains in both September and October," CEO Dick Johnson said.
Overall sales in the quarter did drop sequentially, but that news is taking a back seat to the forecast.
Happy Holidays Expected
As has been seen with retailers such as Kohl's Corp. (KSS) , tempered guidance is a surefire way to bring about a stock slide amid concerns pressuring retail.
$FL flies up? Oh man did they trash too many retailers today.— Jim Cramer (@jimcramer) November 20, 2018
Foot Locker assuaged this concern for investors by not shying away from pushing a positive prediction for the holiday season that is tightly tied in with bullish expectations for both Nike Inc. (NKE) and Adidas AG (ADDYY) .
"We believe we are well-positioned to produce even stronger results in the all-important holiday selling season and the fourth quarter overall," Johnson said, highlighting his confidence moving forward. "We remain on track to achieve the annual top- and bottom-line guidance we gave you for 2018, including a low-single digit comparable sales increase and a double-digit EPS gain."
Foot Locker's same-store sales, which charted nearly one percentage point above expectations in the third quarter, are expected to increase by mid-single digits in the company's peak fourth quarter.
Foot Locker's pronouncements pleased analysts.
"The beat and raise is evidence that FL's operational discipline and strategic investments, particularly in digital, are beginning to bear fruit," Susquehanna analyst Sam Poser wrote in a note on Wednesday. "We believe the third-quarter results represent the beginning of a positive transformation that will further take shape in the fourth quarter and into 2019."
Poser set a $64 price target and a "Buy" rating for the stock.
Raising Their Targets
Poser's bullish price target was in step with a spate of price target increases from analysts on Wall Street, a promising development in the beleaguered retail sector.
Over half of analysts covering Foot Locker stock pushed their price targets upward after the earnings release, bringing the FactSet consensus target up to $58.33 from its $55.95 level prior to the release.
The consensus rating on the stock remains a "Buy," marking a significant bright spot in a bearish environment for retail.