Back to top

Foot Locker (FL) Shows Operational Strength, Risks Remain

Read MoreHide Full Article

Foot Locker, Inc. (FL - Free Report) is one of the most widely recognized names in the athletic footwear and apparel industry. It boasts a strong portfolio of leading brands under a variety of store banners which helps it target specific markets and effectively meet consumer demand. The company had outlined its long-term financial goals that include attaining sales of $10 billion, sales per gross square foot of $600, operating margin of 12.5%, net income margin of 8.5% and a return on invested capital of 17%.

Management believes that the company can benefit in the long run by persistently exploiting opportunities like children’s business, shop-in-shop expansion in collaboration with its vendors, store business, store refurbishment and enhancement of assortments. International expansion, especially in Europe, is another catalyst.

Foot Locker, which shares space with Urban Outfitters Inc. (URBN - Free Report) , American Eagle Outfitters, Inc. (AEO - Free Report) and Citi Trends, Inc. is also focused on augmenting its E-commerce platform, growing direct-to-consumer operations, margin expansion and foraying into underpenetrated markets.

Foot Locker made a quick recovery with better-than-expected results in the second quarter, after commencing fiscal 2016 on a soft note. Sturdy comparable sales performance, cost-containment efforts and strategic initiatives supported the company’s year-over-year growth in both the top and bottom lines. Management reaffirmed its projection of a mid-single digit increase in comparable sales in fiscal 2016. Foot Locker continues to anticipate double-digit growth in earnings per share for the fiscal year.

FOOT LOCKER INC Price and Consensus

FOOT LOCKER INC Price and Consensus | FOOT LOCKER INC Quote

However, a competitive retail landscape, fashion obsolescence and foreign currency headwinds remain concerns. Fashion obsolescence involves a sustained focus on product and design innovation. The company’s pioneering position may be hurt by delays in its product launches. Moreover, the weakening of foreign currencies against the U.S. dollar may require the company to either raise prices or reduce profit margins in locations outside of the U.S. An increase in prices may have an adverse impact on the demand for Foot Locker’s products.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

American Eagle Outfitters, Inc. (AEO) - free report >>

Foot Locker, Inc. (FL) - free report >>

Urban Outfitters, Inc. (URBN) - free report >>

More from Zacks Analyst Blog

You May Like