Brean Still Buying Foot Locker, Lowers Price Target To $66

Foot Locker, Inc. FL shares lost 6 percent on Friday, after the company reported its comps significantly short of expectations. Brean Capital’s Eric Tracy maintained a Buy rating for the company, while reducing the price target from $78 to $66.

Foot Locker reported its comps at +2.9 percent, significantly below the Brean Capital estimate of +3.5 percent and consensus expectation of +4.1 percent. Analyst Eric Tracy pointed out, however, that the company’s performance came in ahead of Dicks Sporting Goods Inc DKS and Hibbett Sports, Inc. HIBB, despite much more difficult comps.

Will The Full Year Expectations Be Met?

Management reiterated expectations for mid-single-digit comps and double-digit EPS growth for the full year, “with some of the retrenchment likely reflecting investor skepticism around prospect of comp re-acceleration, in our view,” Tracy mentioned.

Launch schedule, product pipeline and management execution are required for Foot Locker to re-accelerate comps and meet its comp and EPS guidance, the analyst believes. Ongoing strength in Kid's, International, lifestyle running / classics, easing bball comps in the back half, and an accelerating innovation pipeline should help support comps over the next few quarters.

Tracy commented, however, that bball continued to be an important determinant of comp growth, and there was uncertainty around how “improved price /value prop in marquee bball silhouettes will ultimately manifest,” which was adversely impacting visibility into comp re-acceleration.

The EPS estimates for FY16 and FY17 have been reduced from $4.74 to $4.63 and from $5.21 to $5.03, respectively.

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Posted In: Analyst ColorLong IdeasPrice TargetReiterationAnalyst RatingsTrading IdeasBrean CapitalEric Tracy
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