Foot Locker Q2 preview: where next for Foot Locker shares?
Joshua Warner August 19, 2021 9:43 AM
Foot Locker has benefited as demand for athletic footwear boomed during the pandemic, but will it wane as restrictions are eased? We look at what to expect from the upcoming earnings and consider how Foot Locker shares could react.
When are the Foot Locker Q2 earnings?
Foot Locker will release second quarter earnings before US markets open on Friday August 20.
Foot Locker Q2 earnings preview: what to expect from the results
Analysts are expecting Foot Locker’s quarterly revenue to edge up 0.6% to $2.09 billion from $2.07 billion the year before. Comparable store sales – a key topline metric to watch – are expected to decline 1.4% in the second quarter after jumping over 80% in the first, when the figure was heavily flattered by weak comparatives from the year before when the pandemic hit.
There is a chance for Foot Locker to surprise the market. The company has been cautious on how sales could fare throughout this year on expectations that demand for athletic footwear, which rose during the pandemic as people looked for comfort and ways to improve their exercise regime during lockdown, could slow as restrictions ease.
However, data suggests demand for athletic footwear has remained robust during the quarter. Consumer research firm npd says athletic footwear sales were up 35% year-on-year in the first half of 2021 and were 23% above pre-pandemic levels, driven by a surge of in-store shopping now that outlets have reopened. That has been supported by positive updates from footwear firms such as Adidas and Nike. Still, npd did flag that sales growth slowed to low single-digits in June and expected a weaker second half compared to the first.
Wall Street expects Foot Locker’s profits to grow at a much faster rate, with net income forecast to jump to $110.7 million from just $45.0 million last year, with EPS to leap to $1.05 from $0.43.
Foot Locker has so far refrained from providing any form of financial guidance due to the ongoing uncertainty spawning from the pandemic, but this could change as it gains more clarity moving through the year.
Investors will be keen to learn how new acquisitions will help improve Foot Locker’s earnings going forward after buying Japanese brand atmos and athletic retailer Eurostar, which predominantly operates across the West Coast of the US and has proven particularly popular with the growing Hispanic and Latino communities. Foot Locker splashed out $1.1 billion on the acquisitions and, combined, the two brands generated $600 million in annual revenue in 2020 and are expected to boost Foot Locker’s EPS in 2021.
Investors head into the earnings update safe in the knowledge that the dividend has already been addressed, with Foot Locker on Monday announcing it had hiked its quarterly payout by 50% to $0.30. That will be paid on October 29 to shareholders on the register at the end of play on October 15.
Foot Locker shares have almost trebled since bottoming-out back in March 2020 when the pandemic hit but have lost ground since hitting their highest level since 2017 in May. Brokers are bullish on Foot Locker’s prospects with 23 of them having an average Buy rating on the stock and a target price of $70.85, implying there is up to 31% upside from the current share price.
Where next for the Foot Locker share price?
Foot Locker had been grinding higher since putting in pandemic lows near 17.50 in March 2020. The stock finally reached a high or 66.82 in mid-May 2021, testing previous highs at 68.41 from March 2019. The stock has pulled back in a corrective fashion to horizontal support at 52.96, just above the 200 Day Moving Average at 52.67. Notice the symmetry between the 2019 move lower from the highs and the current move lower from the highs:
Appears to be corrective after a large move higher (not shown prior to 2019 high)
Pulled back to horizontal support near 52.96
Held above the 200 Day Moving Average the first time
If price action continues to follow that of the 2019 highs, price may gap lower after the earnings announcement, as it did in May 2019.
First resistance is at the top trendline of the corrective channel near 58.50. Next level of resistance is the May 18th highs of 66.71, and finally the March 2021 highs at 68.41. If price breaks below the 200 Day Moving Average, the next support level is the bottom trendline of the channel near 51.80, then the 38.2% Fibonacci retracement level from the March 2020 lows to the May 2021 highs near 47.90.
How to trade Foot Locker shares
You can trade Foot Locker shares with City Index by following these four easy steps:
- Open a City Index account, or log-in if you’re already a customer.
- Search for ‘Foot Locker’ in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
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