Foot Locker rallies nearly 6% after same-store sales and profit crush estimates

KEY POINTS

• Foot Locker stock rallies double digits after it crushes fourth-quarter profit and comp sales estimates.
• The company reported Thursday that fourth-quarter same-stores sales growth rose 9.7 percent, more than double the 4.6 percent expected.

An employee arranges Nike basketball shoes on display at the House Of Hoops by Foot Locker retail store at the Beverly Center in Los Angeles.

Patrick T. Fallon | Bloomberg | Getty Images

Foot Locker shares soared on Friday after the shoe company crushed Wall Street's profit projections and reported same-store sales growth that more than doubled expectations.

The company's management pointed to its emphasis on product diversity, strategic partnerships and improvements to both its in-store and digital locations for the earnings and revenue beats. Same-stores sales growth — a metric that measures revenue changes at a company's existing locations — rose 9.7 percent, more than double the 4.6 percent expected.

Foot Locker reported fourth-quarter earnings of $1.56 per share versus Refinitiv estimates of $1.40; sales totaled $2.27 billion.

Shares jumped 5.96 percent Friday.

"We delivered a gain in our gross margin rate above the guidance we provided at the beginning of the year, achieved an inventory turn above our long-term target, and made important investments, both directly in our business and by taking strategic stakes in other companies," Chief Financial Officer Lauren Peters said in a press release.

Foot Locker is in the middle of a broad brand-investment campaign as it seeks to stay relevant with younger shoppers. It announced on Tuesday that it has invested $12.5 million in children's apparel company Rockets of Awesome. That investment comes on the heels of its $100 million venture in online sneaker resell platform Goat Group, along with investments in lifestyle brand Super Heroic, activewear brand Carbon38 and footwear design academy Pensole.

Around 70 percent of the product that Foot Locker buys is from popular shoemaker Nike, which recently revamped its product line and helps drive younger consumers and athletes to its stores, said Cristina Fernandez, senior research analyst at Telsey Advisory Group.

"I would say it's the innovative pipeline and some of the exclusive products that they have," Fernandez told CNBC. "The product innovation pipeline for 2019 is strong and the footwear market remains good."

— CNBC's Lauren Thomas contributed reporting.