Foot Locker Can Drive Comps Growth With Positive Store Traffic

McClintock maintains an Overweight rating on the company, with a price target of $80.

Driving Comps

"FL's typical consumer is healthy, with no hesitation to buy, and maintains significant excitement in the underlying product," the analyst mentioned, while adding, "The company benefits from current levels of heightened interest in sneakers that is resulting from newness/innovation from most major brands."

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McClintock noted that ASPs had consistently improved over the past several years, and Foot Locker was confident that this trend would continue going forward.

According to the Barclays report, "There are several factors driving the increase, including: 1) better inventory management, 2) fewer markdowns, 3) a shift towards premium apparel, and 4) mix shift within the portfolio towards higher price points."

ASPs

Although investors have been focused on the "relatively isolated" ASP decline in signature basketball products, Foot Locker pointed out that there had been ASP increases across a wide range of other categories, including fleece apparel and shoe cleaners.

"Furthermore, the company noted no ASP barriers in running footwear, where Adidas Boost has recently been able to reach as high as $180 with no consumer resistance," McClintock stated. "We remain impressed by FL's high FCF yield and consistent track record of increasing dividends."

At time of writing, Foot Locker was up 0.85 percent on the day, trading at $65.63.

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