Of late, shares of Foot Locker, Inc. (FLFree Report) are riding high on better-than-expected third-quarter fiscal 2017 results and effective implementation of operational and financial initiatives. In the past three months, the stock has gained 36.7%, outperforming the industry’s growth of 24.8%.  Let’s delve deeper.

Hidden Catalyst

Clearly, the third-quarter results provided a fresh breath of life to the stock, which in the recent past had struggled due to dismal performance in the preceding two quarters. Let’s look at Foot Locker earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company. In the past 60 days, the Zacks Consensus Estimate for fourth quarter and fiscal 2017 has increased by 4.2% and 3.3% to $1.23 and $4.08, respectively. Further, for fiscal 2018 earnings estimates have jumped by 5.1% to $3.95 per share.

We believe that continuous exploitation of opportunities such as children’s business, shop-in-shop expansion, store refurbishment and enhancement of assortments are likely to benefit the company in the long run.

International expansion, especially in Europe, is another catalyst. The company is also focusing on augmenting e-commerce platform, growing direct-to-consumer operations, margin expansion and tapping underpenetrated markets. Direct-to-customer comparable sales increased 6.1% in third quarter fiscal 2017. Direct-to-customer sales rose to 13.8% of total sales during the quarter, up from 12.8% a year ago. The company’s store banner dot-com businesses both in the United States and Europe increased in mid-single digit, while digital sales in Canada rose at a double-digit rate.

Further, the Zacks Rank #2 (Buy) company is effectively managing inventory, investing in digital platforms, improving supply chain efficiencies along with reorganizing corporate and division staff. The company also entered into a partnership with Nike for a pop-up store called Sneakeasy NYC. The company’s long-term financial goals include attaining