Foot Locker, Inc. (FL), NIKE, Inc. (NKE): Which of These Sportswear Retailers Will Fit Your Portfolio?

Page 1 of 2
Shoes and clothes need replacement on a consistent basis, even more so for the sportswear segment as these are more subjected to wear and tear. And to top that, kids’ shoes and apparels need the most replacement as kids grow very fast (trust me!) and the older stuff no longer fits their body. So it is clear that the sportswear business has a recurring nature poised to grow in good times and bad. People today are getting more health conscience and the global sportswear industry is expected to generate additional $55 billion in new sales by 2017 so I guess it wouldn’t hurt to look for companies in this segment which promise a steady and positive growth over the long term. Foot Locker, Inc. (NYSE:FL)
Foot Locker, Inc. (NYSE:FL) is one such company which is in an impeccable position right now with a robust balance sheet, steadily growing business along with improving profit margins. The company sells name-brand athletic apparels and shoes from a variety of manufacturers with over 3,000 stores spread across 23 countries. Advantage of choosing a retail chain like Foot Locker, Inc. (NYSE:FL) over brands like NIKE, Inc. (NYSE:NKE) or Adidas is that these brands are exposed to changing consumer preferences whereas Foot Locker, Inc. (NYSE:FL) sells all the brands under one roof so it is always going to find customers not bothered by the change in consumer tastes.
Robust same-stores sales growth and improving margins. One feature which particularly interests me is Foot Locker, Inc. (NYSE:FL)’s steady same-stores sales growth. Management pays special attention to the under-performing stores and fast decisions are made as to whether they need to be renovated or closed. For the latest quarter, 25 new stores were opened, 64 were renovated/relocated and 39 poor performing stores were closed and management plans to close 88 stores this quarter making way for 73 new stores. This close monitoring led revenue for fiscal 2012 rise 10% aided by the 9.4% same-stores sales growth. It’s a huge positive for retail investors as it is important in the retail industry that the non-performing stores shouldn’t burden the top-line growth. Here’s a brief from the company’s annual 10-K filings.
Square Footage
January 28, 2012 Opened Closed February 2, 2013 Relocations/Remodels (in thousands)
Selling Gross
Foot Locker US 1,118 9 55 1,072 58 2,515 4,311
Foot Locker Europe 561 39 10 590 41 808 1,770
Foot Locker Canada 129 2 2 129 9 264 406
Foot Locker Asia Pacific 91 3 2 92 5 128 206
Lady Foot Locker 331 1 29 303 17 398 685
Kids Foot Locker 291 18 4 305 13 421 727
Footaction 292 1 10 283 18 817 1,299
Champs Sports 534 12 7 539 37 1,876 2,861
CCS 22 22 34 51
Total 3,369 85 119 3,335 198 7,261 12,316
The company’s profitability is one the rise with EBIT increasing an impressive 130% on the back of 20.83% rise in revenue during the 2010-2012 period and the gross, operating and net margin all are above the five-year average.
2012 2011 2010 Long-term Objectives
Sales (in millions) (1) $ 6,101 $ 5,623 $ 5,049 $ 7,500
Sales per gross square foot $ 443 $ 406 360 $ 500
EBIT margin (1) 9.9 % 7.9 % 5.4 % 11.0 %
Net income margin (1) 6.2 % 5.0 % 3.4 % 7.0 %
ROIC (1) 14.2 % 11.8 % 8.3 % 14.0 %
TTM 5 Year Average
Gross Margin 44% 42.6%
Operating Margin 10.2% 5.8%
Net Margin 6.5% 2.8%
Going strong in Europe Foot Locker, Inc. (NYSE:FL) recently agreed to buy German athletic chain Runners Point for $94 million to strengthen its foothold in Europe. Runners Point operates over 200 stores throughout Germany and other European nations along with an online subsidiary, Tredex and recorded recorded sales of $254 million in 2012. Foot Locker, Inc. (NYSE:FL) aims to capitalize on Tradex’s strong digital presence to accelerate growth in its own developing e-commerce business in Europe.
Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 30 percentage points in 13 months Learn how!

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!