Foot Locker is anticipated to exceed market expectations for its second quarter, buoyed by favorable trends that could extend the recent upturn in its stock price, according to a recent report from Wedbush Securities. The brokerage has raised its price target for Foot Locker shares from $25 to $33, reflecting a more optimistic outlook as the company prepares to release its second-quarter financial results this Wednesday. The stock of Foot Locker has seen a significant intra-quarter rally, climbing 41% since July, while the S&P 500 only managed a modest 3% increase during the same timeframe.
If the company surpasses both sales and per-share loss expectations, as Wedbush analysts Tom Nikic and Matt Quigley predict, it could see its shares continue to rise in the near term. Wedbush has adjusted its modeling for second-quarter sales to reflect a target of $1.94 billion, up from an earlier estimate of $1.92 billion.
Additionally, the brokerage has refined its projections regarding the company's net loss, expecting a loss of $0.03 per share, which is an improvement from the prior forecast of a $0.10 loss. Market consensus, as gathered from analysts surveyed by Capital IQ, anticipates a revenue of $1.89 billion alongside an adjusted per-share loss of $0.07. This optimistic sentiment is supported by data indicating a strengthening sales trend.
Credit card transactions, as reported by Bloomberg, reflect only a 1% decline in sales compared to a 5% drop in the first quarter. Furthermore, website traffic observations from SimilarWeb suggest a 5% decrease in web visits, a welcome improvement from an 11% decline witnessed in the previous quarter.
Wedbush has elevated its second-quarter comparable sales growth forecast from 1% to 2%, now exceeding the 1% consensus estimate. Analysts Nikic and Quigley note, 'We are seeing evidence of stabilization in the business, which could lead to upside to consensus estimates in the second quarter and potentially Foot Locker's first positive comparable sales growth in six quarters.' Nonetheless, the outlook for the second half of the year raises caution among analysts.
Foot Locker's guidance suggests substantial improvements are necessary, leading to skepticism regarding the likelihood of these expectations being met. They maintain a neutral rating, indicating a cautious approach as the analysts await further developments. With considerations for Wedbush's revised expectations, the projection for earnings per share during the first half is anticipated to decline by 75% year-over-year.
To meet the upper range of its guidance, Foot Locker will need to achieve an impressive $1.50 in EPS during the second half—a figure that is almost three times what was achieved in the previous year. Nikic and Quigley added, 'Given the still-challenging macro environment, we remain somewhat concerned that they over-guided for the second half.' In summary, while Foot Locker shows promise through improved sales trends and revised projections, the company's future growth will depend heavily on navigating a tumultuous economic landscape in the coming months..