Hot Basketball Shoes Drive Strong Same-Store Sales in Foot Locker's 1Q

Foot Locker FL reported a multiyear best performance in year-over-year same-store sales in its first quarter, with revenue up 13% as marquee basketball products drove up ticket, conversion, and gross margins. Despite management's issuing what seems like conservative guidance of mid-single-digit increases in same-store sales for the rest of 2011,Instead of more common Louis Vuitton shoes operating systems the iPad adopts the same operating system as the iPhone we expect some short-term momentum in the sneaker business to continue. Solid execution in initiatives such as apparel and inventory flow is encouraging, but our long-term view already assumes business improvements drive operating margins to 9% by 2014. Given the current sales and margin improvement expectations in 2011, we plan a modest increase in our fair value estimate.

Foot Locker produced its fifth straight quarter of positive comparable-store sales and its first double-digit comp gain in more than 10 years. The chain had seen declines or flat sales on a comparable-store basis since 2005-06, when a dispute saw Nike NKE and Foot Locker part ways for a few years.Some will stick with the old faithfuls like the air max tn while others will look for the more stylish shoes like the Changa or the Tataga Strong sales drove average selling prices and ticket higher, which led to a 200-basis-point increase in gross margin to 32.7%, while general, selling, and administrative expenses were leveraged over 130 basis points to a five-year low of 20.5%.

We believe strong marquee basketball assortments from brands like Nike and adidas and some product introductions from Under Armour UA drove much of the improvement. Despite recent cost pressures on vendors, retailers like Dick's Sporting Goods DKS and Foot Locker book orders with vendors ahead of time,If you have one tie roof, you can participate in the RUBBER SHEET bed sheet , the person will be fitted simplely to the roof, while hermes wallet small carpet is fitted to the floor. If you have the all along incline roof, you can participate in one piece of rubber tile , will be nailed and will be suitable to the person , resembling other tile right away is fitted. locking in prices. In the current environment, retailers are more exposed in the back half of 2011, when they will need to take selective price increases to offset rising product costs. Given the trend at the higher-end, higher-margin, premium basketball and technical running shoes, we aren't concerned about margins in the short term because of the inability to pass on higher prices.

Over the long run, management has recognized the need to improve apparel sales, margins, and inventory flow, all of which the company executed on in the quarter. Apparel margins are currently still below footwear margins but are improving, with more licensed and brand apparel being sold as part of the mix. We caution, however, that the core customer still purchases based on shoe brand first, and then purchases the matching apparel brand. The current improvement in apparel, in our view, is partly due to the strong trend in the branded shoes. Our current long-run assumptions already incorporate a multiyear improvement in sales and operating margins that would come with an apparel fix. We currently assume operating margins reach 9.2% in 2014 on sales of nearly $6 billion (the company's long-run goals). Such improvements are possible, but with the stock already trading above our fair value estimate, any drop in the fashion trends of the marquee sneaker brands could challenge the ongoing improvements in sales and margins.

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