Foot Locker Inc. fell almost 20%, the most in almost two years after it reported first-quarter sales and profit that missed analysts’ estimates. For the first quarter, Foot Locker reported earnings of $1.53 per share, missing expectations by 7 cents and revenue of $2.08 billion, which also missed expectations by $30 million. Regarding full year guidance, Foot Locker now expects high single digit earnings per share growth.
Still, Foot Locker management remains optimistic.
“We started the year with great energy, innovative products, and exciting customer events, leading to solid top-line growth in the first quarter with strong performance across our regions, banners, channels, and categories,” said Foot Locker CEO Richard Johnson.
As such, Johnson added that the company believes it remains on track to meet the long-term goals and implement the strategic initiatives it outlined at its Investor Day in March.
But here is the issue. Fook Locker made a huge push into digital commerce allowing them first digital entry to mainland China in 2018. However, as the trade war between the US and China intensify, the Chinese government will mandate Chinese people to boycott American companies and product.
The U.S. earlier this month increased tariffs from 10% to 25% on $200 billion worth of Chinese goods. Trump is also proposing to expand another round of tariffs, which would increase the cost of sneakers and shoes by 25%. This will definitely hurt Foot Locker’s margins if they absorb the cost and same store sales growth if they past the cost to consumers in subsequent quarters.
On the monthly chart, price just breached the up trendline.
And although price is reacting to the daily demand at $43.50, the chart suggests and the fundamentals suggest price is going to fill the gap in the coming quarters.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.