Foot Locker Sales Trends Likely To Decelerate Going Forward, Buckingham Research Warns

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  • Foot Locker, Inc. FL shares have gained 20 percent year-to-date, and are trading close to their 52-week high of $77.25.
  • Buckingham Research’s Scott Krasik downgraded the rating on the company from Buy to Neutral, while reducing the price target from $82 to $69.
  • With key categories maturing, there could be a sequential decline in sales trends, while the company’s shares are trading at a meaningful premium to peers, Krasik mentioned.

Although Foot Locker’s fundamentals continue to be robust, the company is likely to witness a sequential decline in sales trends, since its key categories are maturing, analyst Scott Krasik said. The stock currently trades at a premium to its historical average as well as to Finish Line Inc FINL [Rated: Buy, PT: $27].

Krasik expects Foot Locker to report its 3Q sales and EPS ahead of the consensus estimates. However, November trends could decelerate from high-single-digit growth in 3Q15 to low-single-digit growth month-to-date.

Foot Locker’s shares have appreciated 20 percent in 2015, versus a 2 percent rise in the S&P 500. Moreover, there has been a subtle shift in the current athletic cycle toward fashion athletic products, away from the company’s core positioning in premium performance products, Krasik pointed out.

“We estimate FL will comp at least +7% in 3Q with upside to +9% suggesting that if the two-year stack holds again in 4Q, comps will decelerate to +MSD [mid-single-digit]…In November, we think the retro launch comparison pre-EPS is unfavorable against a more highly anticipated launch last year,” the Buckingham Research report noted.

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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsBuckingham ResearchScott Krasik
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