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Why The Nike Relationship Is Only Getting Stronger For Foot Locker

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Why The Nike Relationship Is Only Getting Stronger For Foot Locker
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  • Shares of Foot Locker, Inc. (NYSE: FL) have been rising steadily for most of 2015 and are up 18 percent year-to-date.
  • Canaccord Genuity’s Camilo Lyon maintained a Buy rating on the company, with a price target of $80.
  • Foot Locker’s strengthening relationship with Nike is driving the company’s growth, Lyon stated.

Foot Locker management seems confident about the future opportunities and the company’s ability to drive consistent comp gains and EBIT margin expansion. Foot Locker is fast emerging as a well-diversified specialty athletic retailer with many growth avenues, analyst Camilo Lyon said.

He added that the company is expanding its product portfolio to include an increased assortment of running and casual footwear besides its premium basketball products.

Lyon mentioned that the key to Foot Locker’s success is its strengthening relationship with Nike Inc. (NYSE: NKE) and the growing popularity of other footwear brands including Adidas and Puma.

See Also: Nike Just Signed LeBron James For Life

“All of this supports our belief that FL is well positioned to continue driving productivity gains while also expanding its EBIT margins past peak levels via disciplined inventory management, systems initiatives, and supply chain productivity gains,” the Canaccord Genuity report noted.

Foot Locker is currently implementing a margin improvement strategy through a markdown and merchandise allocation system. In Spring 2016, the company will also implement the second phase of this strategy – SKU ordering based on sell-through algorithms.

“We believe this phase will be a significant driver of incremental comp growth in addition to further markdown benefits, and ultimately FL's continued EBIT margin expansion,” Lyon commented.

Latest Ratings for FL

DateFirmActionFromTo
Nov 2016PiperJaffrayDowngradesOverweightNeutral
Nov 2016WedbushInitiates Coverage OnOutperform
Sep 2016GuggenheimInitiates Coverage onNeutral

View More Analyst Ratings for FL
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