More on Foot Locker, turnover and some links

I took a further look at the Foot Locker Investor relations homepage (which by the way looks nice and simple) and found their March 2015 Investor Day Presentation (here). Very interesting numbers on page 77: They plan to have $ 10 bn in Sales and a net income margin of 8,5% in 2020. In my model I calculated with $ 9.8 bn and 8,96%. I’m very happy that the numbers are so close together which reinforced my opinion on the company. I would say their forecast is reasonable.

 

Turnover at Foot Locker

Numbers according to yahoo finance:

Inventory, Jan 2016 Revenue, Jan 2016 Turnover
FL 1285000 7412000 5,8
ROST 1419104 11939999 8,4
TJX 3695113 30944938 8,4
KSS 4038000 19204000 4,8
WMT 44469000 482130000 10,8
numbers in thousands

numbers according to yahoo finance

Turnover easy explained: Let’s assume you have the backyard full of stuff. The stuff is worth 100 USD. That’s 100 USD in inventory. Let’s say you sell all that stuff in one year, that would be 100 USD in reveue. Now lets assume you would buy new stuff (worth 100 USD) and sell that again – and repeat that till you sold stuff 5x in a year. That would be a 5x turnover per year.

There is clearly room for a higher turnover rate at Foot Locker. We will see if they can improve their rate till 2020 as they plan (+ 3x per year).

On the other hand Turnover is not everything. Buying your stuff worth 100 USD and selling it for 100USD wouldn’t make it a great deal, even if you sell your stuff 20 times in a year. Wal-Mart for example has a much higher turnover rate than Foot Locker but their margin is lower.

Revenue, Jan 2016 Net Income, Jan 2016 Net margin
FL 7412000 541000 7,3%
ROST 11939999 1020661 8,5%
TJX 30944938 2277658 7,4%
KSS 19204000 673000 3,5%
WMT 482130000 14694000 3,0%
numbers in thousands

By the way, I am impressed by ROST’s numbers.

Some links:

Hurricane Capital via oldschoolvalue.com with an fantastic piece on how to spot superior operators in the Retail Industry (link)

Hennes & Mauritz grew sales 9% in Q1-2016 but profits were lower (link)

The long-term-investments blog with a overview about traditional Apparel Retailing from a dividend perspective (link)

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