Foot Locker Kicks Off Biggest Rally in Decades as Slump Eases

(Bloomberg) -- Foot Locker Inc. is showing signs of pulling out of a sneaker downturn that has torn through the athletic industry this year.

The retailer kicked off its biggest intraday rally in more than 30 years after posting third-quarter earnings that handily topped analysts’ estimates. Chief Executive Officer Dick Johnson also said he expects the chain to modestly beat the top- and bottom-line guidance it gave for the fourth quarter.

Nike Inc. and Under Armour Inc., two athletic brands that have been battered by this year’s slump, also gained on the news. And Hibbett Sports Inc. saw its biggest intraday increase since its initial public offering in 1996.

Foot Locker is benefiting from more high-end shoes hitting the market, letting the chain stock its shelves with more desirable inventory. It also has been cutting jobs and trimming expenses, moves that are expected to help it better cope with the industry’s swings.

While the sneaker business is still reliant on heavy discounting to move merchandise, Foot Locker is counting on a more nimble organization and better inventory management to improve results. The optimism bodes well for the company heading into the critical holiday season.

“The reduction and reorganization of our corporate and division staff during the quarter, while a difficult decision, was a critical step in positioning us for success,” Johnson said in a statement.

Excluding some items, earnings amounted to 87 cents in the third quarter. Analysts estimated 80 cents on average. Comparable sales fell 3.7 percent during the period, but overall revenue exceeded projections.

The shares rose as much as 31 percent to $41.73 in New York trading, the biggest intraday gain since at least 1980. They had been down 55 percent this year through Thursday’s close.

To contact the reporter on this story: Nick Turner in New York at nturner7@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Jonathan Roeder

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