Why Shares of Foot Locker, Inc. Jumped 10% in August

By Markets Fool.com

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What happened

Shares of retailer Foot Locker, Inc. (NYSE: FL) jumped 10.1% in August, according to data provided by S&P Global Market Intelligence, after the company reported better-than-expected earnings.

So what

Second-quarter revenue jumped 5% to $1.78 billion and net income rose 7% to $127 million, or $0.94 per share. Results topped the $1.76 billion and $0.90 per share in earnings that analysts expected. That was enough to get investors excited.

The big takeaway is that customers aren't leaving Foot Locker's bricks-and-mortar stores for online retailers. Management said that basketball, running, classic footwear, and apparel all had comparable sales increases in the quarter. If that trend continues, it would be great news for the company.

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Now what

As far as retailers go, Foot Locker finds itself in a strange position. Online sales of shoes are picking up and the company is, ironically, competing with the brands it sells, which are bringing products directly to consumers. It's holding off those threats for now, and that's why shares are recovering. Watch top-line results going forward, because if sales start falling the company could face the same decline other retailers did, which is the big risk going forward.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.