Athletic and apparel retailer off to slow start in Q1
Foot Locker posted weaker-than-expected earnings and sales for its first quarter after high promotional activity and getting off to a slow start in February.
Net income for the company's first quarter ended April 29, 2017 was $180 million, or $1.36 per share, compared with net income of $191 million, or $1.39 per share in the year-ago period.
First quarter same-store sales increased 0.5%, lower than expected. Total sales increased 0.7%, to $2 billion, compared with sales of $1.98 billion last year. Excluding the effect of foreign currency fluctuations, total sales for the first quarter increased 1.8%.
On the company’s quarterly earnings call, chief executive Richard Johnson said Footlocker plans to open a flagship in Los Angeles in the fourth quarter.
“The first quarter was one of our most profitable quarters ever, but it did fall short of our original expectations," stated Johnson in the earnings release. "The slow start we experienced in February, which we believe was largely due to the delay in income tax refunds, was unfortunately not fully offset by much stronger sales in March and April. Nonetheless, we believe our banners remain at the center of a vibrant sneaker culture. We are confident that our customers have not lost their tremendous appetite for athletic footwear and apparel and that our position in the industry is stronger than ever."
The company's gross margin rate decreased to 34.0% of sales from 35.0% a year ago, and the selling, general. Administrative expense rate increased 30 basis points to 18.5% of sales.
During the first quarter, Foot Locker opened 30 new stores, remodeled or relocated 61 stores, and closed 39 stores. As of April 29, 2017, the company operated 3,354 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, 62 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 15 franchised Runners Point stores in Germany.
Off-pricer’s Q1 earnings beat Street
Expansion-minded Ross Stores turned in a solid performance in its first quarter amid what its CEO called “uncertainty and volatility” in the retail environment.
The off-price retailer, which is opening some 80 to 90 stores annually, reported earnings per share for the quarter ended April 29, 2017 of $.82, up from $.73 in the year-ago period. Net earnings grew to $321 million, compared to $291 million in the prior year.
Sales for the quarter increased 7% to $3.3 billion, in line with expectations. Same-store sales rose 3%.
“We achieved respectable growth in both sales and earnings during the first quarter despite the uncertainty and volatility in the external environment,” said Barbara Rentler, CEO, Ross Stores. The retailer operates 1,363 Ross stores and 198 dd’s Discount locations.
During the first quarter, Ross we repurchased 3.3 million shares of common stock for an aggregate price of $215 million. It remains on track to buy back a total of $875 million in common stock during fiscal 2017 under the new two-year $1.75 billion authorization approved the board in February.
For the second quarter ending July 29, 2017, Ross is forecasting same-store sales to be up 1% to 2%, on top of a 4% gain last year, with earnings per share of $.73 to $.76, up from $.71in the prior year period. Based on our first quarter results and guidance for the second quarter, it now projects earnings per share for the 53 weeks ending February 3, 2018 to be in the range of $3.07 to $3.17, compared to $2.83 last year.
Things are looking up at Gap, led by Old Navy
Gap Inc.’s reported a 12% jump in first quarter profit amid another strong performance from its Old Navy division.
Net income rose to $143 million, or 36 cents per share, in the quarter ended April 29, from $127 million, or 32 cents per share, a year earlier. Its results easily beat the Street, which had predicted earnings of 29 cents per share.
Net sales for the quarter were $3.4 billion, about flat with last year and also better than expected. The translation of foreign currencies into U.S. dollars negatively impacted the company’s net sales for the first quarter of fiscal year 2017 by about $11 million, Gap said.
Total same-store sales for the quarter rose 2%. Analysts had expected a 2% decrease. By brand, same-store rose 8% at Old Navy, and fell 4% at Gap and 4% at Banana Republic.
“We are pleased with our positive comp and earnings growth this quarter,” said Art Peck, president and CEO, Gap Inc. “We’ve made substantial improvements in product quality and fit, and our increasing responsive capabilities are enabling us to better react to trends and demand. While the retail environment continues to be challenging, we are focused on delivering the best possible product and customer experience, and our ability to leverage a portfolio of iconic brands and operating scale uniquely positions the company for long-term growth.”
The company also reaffirmed its full-year diluted earnings per share guidance to be in the range of $1.95 to $2.05.
The company ended the first quarter of fiscal year 2017 with 3,652 store locations in 50 countries, of which 3,186 were company-operated. It expects store count to be about flat at the end of fiscal year 2017 compared with fiscal year 2016, down from previous guidance of 40 net store openings.