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Foot Locker shares spike despite sales miss

 

Monday, May 23, 2022

The news shaping the markets today

Russia’s forces renewed their assault on a key eastern city in Ukraine, a day after US President Joe Biden signed a massive economic and military aid package. The news sent WTI crude oil futures higher this morning.


Thailand’s unemployment rate fell to 1.53% in the first quarter, from 1.64% in the fourth quarter, amid easing covid-19 restrictions, lending support to the THB/USD forex pair.


Australia’s Labor Party led by Mr Anthony Albanese won the national election on Saturday. Albanese was sworn in as the country’s new leader, which sent the AUD/USD pair higher in forex trading this morning.


Eurozone’s consumer confidence indicator fell by 0.9 points to -21.1 in May, but still came in ahead of market expectations of -21.5, providing some support to the EUR/USD forex pair.


Macau’s visitor arrivals fell 23.7% year-over-year to 606,841 in April, following a 30.2% decline in the previous month, amid a resurgence of covid-19 in China, which sent the MOP/USD pair lower in forex trading this morning.

 

What’s happening: Shares of Foot Locker gained on Friday, despite the company missing sales expectations for the first quarter.

 What happened: The ongoing supply chain disruptions and rising freight costs have impacted the first quarter results of most retailers.

Even as some big box retailers missed earnings estimates and issued weak guidance, Foot Locker managed to record upbeat earnings for the latest quarter.

 How were the results: The New York-based company reported growth in revenues for the first quarter but missed market views by a small margin.

  • Sales grew 1% year-over-year to $2.17 billion, missing the consensus estimates of $2.20 billion.
  • Adjusted earnings came in at $1.60 per share, exceeding market expectations of $1.55 per share.

Why it matters: Some big retailers, like Walmart and Target, recently reported weaker-than-expected quarterly earnings and warned of a change in consumer appetite amid rising inflation as well as higher costs due to supply chain issues and rising transportation costs.

The results from retailers like Under Armour and Nike have also been impacted by lockdown restrictions in China.

Foot Locker was not as impacted as the other retailers because most of the company’s business is domestic. Although Foot Locker’s comparable store sales declined 1.9%, the reading was still better than the consensus estimate of a 3.5% decline. The company managed to beat expectations with higher shoe sales.

Gross margins shrank by 80 basis points amid higher supply chain costs and markdowns, while operating income declined 23% to $217 million. Selling, general and administrative expenses climbed 10.8% year-over-year to $463 million.

As of April 30, 2022, the company’s merchandise inventories rose 37% year-over-year to $1.4 billion.

“Following our solid results from the first quarter, our strong inventory position going into the remainder of the year, and our strengthening vendor relationships, based on our current visibility, we now expect to achieve the upper end of our revenue and earnings guidance for the full year,” CFO Andrew Page said during the earnings call.

Foot Locker said its fiscal 2022 adjusted earnings could come at the high end of its earlier forecast of between $4.25 and $4.60 per share.

 How shares responded: Foot Locker’s shares gained 4.1% to close at $31.54 on Friday, following the release of quarterly results. The stock has tumbled around 30% year to date.

What to watch: Investors will continue monitoring rising costs and supply chain issues amid accelerating inflation levels in the US.

The markets today

Gold will be in focus today after ending last week with gains

Context: Gold prices closed slightly higher on Friday and recorded weekly gains, amid significant volatility on Wall Street and in other global stock markets.

 Details: Traders have been turning to safe-haven assets, with high volatility in global stock markets.

Treasuries also rallied last week, bringing yields lower, after a sharp decline in equities, which increased demand for safe-haven assets. The yield on the US 10-year note pulled back sharply to around 2.79% last week.

The US Dollar Index, which measures the greenback’s performance versus a basket of six major rivals, had surged to a 20-year high earlier this month, but recorded a weekly decline of more than 1% last week. A weaker dollar makes assets priced in the currency less expensive for foreign currency users.

Gold for June delivery rose $0.90, or slightly below 0.1%, to close at $1,842.10 an ounce on Friday, swinging between gains and losses during the session. The yellow metal had surged 1.4% on Thursday to record the best daily percentage increase since April 12.

The safe-haven metal also recorded a weekly gain of 1.7%, after recording losses for four straight weeks, its longest stretch since August 17, 2018.

However, July silver declined 23 cents, or 1.1%, to close at $21.674 an ounce on Friday. However, the white metal ended the week with gains of 3.3%, notching its highest weekly percentage rise since April 14.

July copper declined 0.2% to close at $4.275 a pound. July platinum fell 1.3% to $941.10 an ounce, while June palladium settled at $1,939.70 an ounce, down 2% on Friday.

What to watch: Traders will continue monitoring the equity markets and the US dollar, which are expected to impact gold prices ahead. Markets will also keep an eye on the ongoing Russia-Ukraine war and rising covid-19 cases in some parts of the world.

 Other Markets: European trading indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 1.19%, 0.72%, 0.20% and 0.73%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0585 and 1.0592 Negative
USD/JPY – 127.28 and 127.40 Positive
WTI Crude Oil – 110.55 and 110.85 Negative
Natural Gas – 8.173 and 8.187 Negative
S&P 500 – 3837.81 and 3866.86 Positive 

Market snapshot

What else to watch today

Turkey’s manufacturing confidence index, capacity utilization and tourist arrivals, Indonesia’s value of loans, Germany’s Ifo business climate indicator, Ifo expectations indicator, Ifo current conditions index and Bundesbank monthly report, Brazil’s IBC-Br index of economic activity and Central Bank of Brazil’s focus market readout, as well as US Chicago Fed National Activity Index.

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