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Foot Locker: Why Are Most Analysts Bullish on the Stock?

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Ratings summary

Ahead of the upcoming fiscal 4Q17 results, most analysts covering Foot Locker (FL) have maintained a “buy” rating. Of the 21 analysts covering FL stock, 52.0% recommended a “buy,” 38.0% recommended a “hold,” and the remaining 10.0% recommended a “sell.”

Expansion of e-commerce and a tough retail landscape created a highly challenging situation for Foot Locker (FL). Nike and Adidas are developing their own direct-to-customer sales channel, and they are also selling products on Amazon directly. These factors have hurt the market share of the footwear and sportswear retailers.

Like other traditional retailers, Foot Locker has been working on increasing the reach of its digital sales portal. The company is also focusing on its core operations by cutting costs, streamlining its supply chain, and adding more products to its portfolio.

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After disappointing sales in the first three quarters of fiscal 2017, Foot Locker expects to report a 5.0% increase in sales in fiscal 4Q17 as the sale of premium products is gaining traction. However, margin pressure resulting from its ongoing investments is expected to weigh on the bottom line. The company’s adjusted earnings per share (or EPS) are expected to be $1.25 compared with $1.37 per share reported in fiscal 4Q16.

Currently, the analysts’ 12-month average target price for Foot Locker is $54.26, which reflects a 12.4% upside to its stock price on February 22, 2018.

Where do Foot Locker’s peers stand?

Of the 14 analysts covering DSW (DSW), ~29.0% gave it a “buy” rating with the remaining analysts giving it a “hold” rating. For Finish Line (FINL), ~7.0% of the 15 analysts covering the stock recommended a “buy” rating while 73.0% rated it as a “hold.” Skechers (SKX) received a “buy” rating from 100.0% of the analysts covering its stock.

Currently, analysts’ target price for DSW is $21.54, reflecting a 9.3% upside to the stock price as of February 22, 2018. Finish Line’s mean target price is $12.67, which indicates a 22.4% upside to its stock price as of February 22, 2018. Skechers’ target price is $48.22, implying a 26.2% upside to its stock price as of February 22, 2018.

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