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Susquehanna Rates Foot Locker as ‘Positive’

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Aug. 15 2016, Published 2:47 p.m. ET

Price movement

Foot Locker (FL) has a market cap of $8.4 billion. It rose by 1.3% to close at $61.14 per share on August 12, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 4.0%, 5.9%, and -4.8%, respectively, on the same day. FL is trading 3.8% above its 20-day moving average, 8.4% above its 50-day moving average, and 0.25% below its 200-day moving average.

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Related ETFs and peers

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 1.1% of its holdings in Foot Locker. The ETF tracks a market-cap-weighted index of growth companies culled from the S&P 400. The YTD price movement of IVOG was 10.6% on August 12.

The Vanguard Small-Cap ETF (VB) invests 0.15% of its holdings in Foot Locker. The ETF tracks the CRSP US Small Cap Index. The market-cap-weighted index includes the bottom 2%–15% of the investable universe.

The market caps of Foot Locker’s competitors are as follows:

  • Walmart (WMT) — $230.0 billion
  • DSW (DSW) — $2.0 billion

Foot Locker’s rating

Susquehanna has initiated the coverage of Foot Locker with a “positive” rating and set the stock price target at $73 per share. B. Riley has upgraded Foot Locker’s rating to a “buy” from “neutral” and set the stock price target at $75 per share.

Performance of Foot Locker in fiscal 1Q16

Foot Locker reported fiscal 1Q16 sales of $1.99 billion, a rise of 3.7% over the sales of $1.92 billion in fiscal 1Q15. Its net income and EPS (earnings per share) rose to $191.0 million and $1.39, respectively, in fiscal 1Q16, compared with $184.0 million and $1.29, respectively, in fiscal 1Q15.

Foot Locker’s cash and cash equivalents and merchandise inventories rose by 7.7% and 2.1%, respectively, between fiscals 1Q15 and 1Q16. Its current ratio rose to 4.5x and its debt-to-equity ratio fell to 0.40x in fiscal 1Q16, compared with 3.6x and 0.42x, respectively, in fiscal 1Q15.

During fiscal 1Q16, the company repurchased 1.4 million shares worth of ~$88 million. It also opened 32 new stores, remodeled or relocated 55 stores, and closed 19 stores. In the next part of this series, we’ll discuss Philip Morris International (PM).

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