Foot Locker shares after upbeat earnings report

The news shaping the markets today

Ukraine’s nuclear energy firm Energoatom said Russia’s military had shelled the Zaporizhzhia nuclear plant. The news sent the safe-haven US dollar higher this morning.

The People’s Bank of China held its key lending rates for the third consecutive month at is recent fixing, exerting pressure on the CNY/USD forex pair.

Ireland’s KBC Bank consumer sentiment index fell to 45.3 in November, from 46.1 a month ago, which sent the EUR/USD pair lower in forex trading this morning.

Thailand’s gross domestic product grew 4.5% year-over-year in the third quarter, matching market estimates. However, the THB/USD forex pair remained under pressure.

Canada’s producer prices increased by 2.4% in October, after remaining flat in the previous month. The latest reading came in above market expectations of a 0.4% increase and sent the CAD/USD pair lower in forex trading this morning.

What’s happening: Shares of Foot Locker climbed on Friday, after the company released results for its third quarter.

What happened: Foot Locker’s stock climbed the most since August after the company posted upbeat Q3 results on higher demand despite rising inflation.

The New York-based retailer had also recently announced it would expand its partnership with one of the world’s largest sportswear manufacturers.

How were the results: The specialty athletic retailer reported a slight decline in sales for the third quarter, but both the top- and bottom-line numbers surpassed market views.

• Sales declined by 0.73% year-over-year to $2.17 billion but still topped the consensus estimates of $2.09 billion.
• Adjusted earnings came in at $1.27 per share, exceeding market expectations of $1.11 per share.

Why it matters: Shoppers continued to cut back on their discretionary spending due to a sharp rise in food and housing costs.

Foot Locker’s comparable store sales grew 0.8% from the prior year, well ahead of market expectations of a 5.9% decline. Operating margins came in at 7.2%, while operating income contracted by 19.9% to $157 million.

Foot Locker revamped its merchandise during the quarter, after Nike increased its focus on direct-to-consumer sales. The company’s merchandise inventory rose 29.5% to $1.69 billion.

Earlier this week, the company had announced plans to expand its partnership with Puma to bring in more exclusive collections for the retailer. Puma sales at Foot Locker grew in high single digits during the latest quarter.

Adidas also announced the expansion of its partnership with the company in May and Adidas sales at Foot Locker grew in mid-single digits in the quarter.

“While the macroeconomic environment remains uncertain, our demand trends, and inventory position in high-quality product gives us confidence we can achieve our new range, while also remaining flexible to manage through ongoing volatility,” CFO Andrew Page said during the earnings call.

Foot Locker raised its guidance for 2022, projecting a 4%-5% decline in sales, compared to its earlier forecast of a 6%-7% decline. Management also boosted their adjusted earnings forecast from $4.25-$4.45 per share to $4.42-$4.50 per share.

How shares responded: Foot Locker’s shares surged as much as 18%, the most since August, during Friday’s session. The stock closed higher by 8.5% at $35.88 on Friday and has gained around 17% over the past six months.

What to watch: Investors will keep an eye on company’s partnerships with Puma and Adidas, which is expected to support its sales with Nike focusing on DTC sales.

Markets will also focus on US dollar movements, as further strength in the greenback could negatively impact the company’s overall results.

The markets today

European stocks will be in focus today after settling higher on Friday

Context: European markets closed higher on Friday, following comments from US Federal Reserve officials.

Details: Global market sentiment was supported by lower-than-projected readings on US consumer and wholesale inflation, which increased the prospects of the Fed slowing its rate hike strategy.

However, Boston Fed President Susan Collins said policymakers could hike rates by another 75 basis points to curb inflation.

The STOXX Europe 600 index gained 1.16% to close at 433.33 on Friday, ending the week higher. Almost all sectors settled in the positive zone, with retail and auto stocks gaining around 2% on Friday.

UK’s Finance Minister Jeremy Hunt announced several tax hikes and tighter public spending in his budget plan on Thursday, while warning of a GDP contraction in 2023. Retail sales in the UK grew 0.6% in October, after declining by 1.5% in the prior month. London’s FTSE 100 snapped three session of losses, gaining 0.53% to close at 7,385.52 on Friday.

Germany’s DAX 40 climbed 1.16% to 14,431.86 to record its seventh straight weekly gain, while France’s CAC 40 surged 1.04% to 6,644.46.

What are expectations: Traders await data on producer price inflation from Germany today. Producer prices in Germany, which rose by 2.3% in September, are expected to increase by 1.1% in October.

Other Markets: US indices closed mostly higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.59%, 0.48% and 0.01%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Turkey’s tourist arrivals and government debt, Central Bank of Brazil’s focus market readout, as well as US Chicago Fed National Activity Index.