May 25, 2018 / 3:09 PM / a year ago

Foot Locker tops forecasts as premium brands sell

(Reuters) - Sneaker and sportswear specialist Foot Locker Inc (FL.N) beat Wall Street sales estimates by the most in at least two years on Friday, citing strong demand for premium products from its top vendors Nike Inc (NKE.N) and Adidas AG (ADSGn.DE).

FILE PHOTO: Customers walk by the Foot Locker store in Broomfield, Colorado in a slow shutter exposure November 17, 2016. REUTERS/Rick Wilking

First quarter profit at the retail chain also topped analysts’ consensus estimates, according to Thomson Reuters I/B/E/S, and shares in the company soared 16 percent in the first hour of trading in New York in response.

Traditional U.S. retailers have been facing relentless pressure from a shift to online retailers like (AMZN.O) and a resulting drop in traffic at malls. For Foot Locker, a tie-up between the e-commerce giant and Nike launched last year has only added to those pressures.

Industry research, however, shows sneaker sales, crucial to Foot Locker’s bottom line, rose 10 percent globally last year and a dog fight between Nike and Adidas has also seen the big brands spending heavily on U.S. sales and marketing.

Sales at the chain’s stores open at least a year dipped 2.8 percent, but that fall was smaller than the decline of 3.6 percent analysts were expecting, according to research firm Consensus Metrix.

Net sales at the New York-based retailer rose 1.2 percent to $2.03 billion, beating analysts’ expectations of $1.96 billion.

“These strong results were led by branded assortments from Nike and Adidas as well as the resurgence of ‘90s influenced brands like Champion and Fila,” Chief Executive Officer Richard Johnson told a post-results call with analysts.

Foot Locker has been revamping its own strategy by setting up stores outside malls, selling relevant and popular products quickly and striving to control inventory more tightly.

The company singled out Nike’s Air Max 270, Max 2.0 and Nike Tuned Air as among its top selling brands and reiterated that it expected to return to growth of comparable store sales this year.

That reflects a booming market in luxury sneakers that has drawn in high-end brands such as Kering’s (PRTP.PA) Gucci, Prada (1913.HK) and Balenciaga and seen price tags for limited editions soar.

“The flow of premium product continues to improve, with increasing breadth and depth in the most sought after styles from our key vendors,” Johnson said.

Analysts said the results bode well for Nike in particular.

Telsey Advisory analyst Cristina Fernández said that new product flow from vendors could lead to positive comparable sales in the second quarter.

The company’s income dipped to $165 million share in the quarter ended May 5, from $180 million, a year earlier.

Excluding items, however, the company earned $1.45 per share, beating analysts’ average estimate by 20 cents, according to Thomson Reuters I/B/E/S.

Foot Locker’s shares were up 15.7 percent at $53.68 in morning trading, while peer sports good retailer Hibbett Sports Inc’s (HIBB.O) shares fell 14 percent after posting quarterly results that missed estimates.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Patrick Graham

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