Foot Locker, Inc. (FL - Analyst 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 banner.com 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 - Analyst Report) , American Eagle Outfitters, Inc. (AEO - Analyst Report) and Citi Trends, Inc. (CTRN - Analyst Report) 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.
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.
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