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Shares of Foot Locker (NYSE:FL) are up about 25% after the retailer reported earnings for its second quarter and named Mary Dillon as the next CEO.
Foot Locker reported an adjusted EPS of $1.1 on revenue of $2.07 billion, which compares to $0.8 on revenue of $2.08 billion expected. Comparable sales were down by 10.3%, better than the estimate of -12.1%.
“Despite an increasingly challenging macroeconomic backdrop, we delivered a solid quarter against the favorable fiscal stimulus and promotional environment from last year,” said Richard Johnson, Chairman and Chief Executive Officer.
For the full year, FL narrowed its adjusted EPS outlook to $4.25 to $4.45, while it previously saw a high end of $4.25 to $4.60. Revenue is seen falling by 6% to 7%, worse than the prior guidance that called for a high end of -4% to -6%.
Comparable sales are expected to drop by 8% to 9%, which is slightly better than the -8% to -10% range communicated earlier.
The company said that Chairman and CEO Richard A. Johnson will retire and will be replaced by Mary Dillon, while Dona Young will become the non-executive chair.
A Citi analyst upgraded FL stock to Neutral from Sell and hiked the price target to $38 from $25.
“We believe FL’s narrative has changed materially with this news, as Dillon will breathe new life into FL,” the analyst said in a client note.
Similarly, a BofA analyst upgraded FL to Neutral from Underperform with a price target of $43, up from $28, as the risk/reward is now more balanced.
According to a Goldman Sachs analyst, Mary Dillon is “an experienced CEO with a highly successful track record in leadership and idea generation from her time at Ulta.”
Similarly, a Quo Vadis Capital analyst said Mary Dillon as CEO at Foot Locker is “a huge positive”.
“Ms. Dillon is a leader with a strong voice and will represent a meaningful change in tone for Foot Locker. We think the ripples within the organization could be very positive. We also believe communication to investors will be upgraded based on the significant credibility she will bring to crafting a strategy and establishing an outlook,” the Quo Vadis Capital analyst said in a client note.
