27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Foot Locker Inc (NYSE:FL) is entering 2018 on firmer footing, according to a report from Canaccord Genuity ahead of Foot Locker's Friday fourth-quarter earnings release.
The Analyst
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Canaccord's Camilo Lyon reiterated a Buy rating on Foot Locker with a $67 price target.
The Thesis
Foot Locker has been successful in its efforts to clear the excess inventory glut that has weighed on the industry over the past several quarters.
The retailer aggressively marked down Nike Inc (NYSE:NKE) and adidas AG (ADR) (OTC:ADDYY) starting with the back-to-school season and heading into the New Year.
With the pace of promotional activity starting to ease in January, Lyon said it's a sign that inventory is approaching equilibrium.
“That, in conjunction with deeper allocations of on-trend product, positions Foot Locker for a solid rebound in 2018, we believe,” Lyon said in a Monday note. (See the analyst's track record here.)
Although the intense promotional environment will likely weigh on gross margins, Lyon said gross margin compression is less important if it means that Foot Locker exits 2017 with a mostly clean inventory position.
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A clean inventory slate comes at an important time for Foot Locker after Under Armour Inc (NYSE:UAA) released its HOVR platform and Nike launched its Epic React platforms in the month of February. Nike is already seeing positive response from its new innovation, which will undoubtedly benefit Foot Locker, Lyon said.
“A clean inventory position is fundamental to our expectation that Q2 will mark the inflection point for FL's comps and gross margins to turn positive."
Canaccord projects comps will be down 3 percent in the fourth quarter, but expects them to stabilize in the first quarter and then turn positive come the second quarter.
Foot Locker’s improving fundamentals and tax reform benefits should lead to significant EPS upside against the Street’s expectations, said Lyon.
“Overall, we view FL’s 2018 setup as highly favorable due to our expectations for sequentially increasing volumes of new footwear innovations against easy comp and gross margin comparisons,” he said. “As such, we view the recent stock pullback as a buying opportunity.”
Price Action
Foot Locker shares were down 0.36 percent at $45.76 near the end of Thursday's trading session.
Related Links:
Foot Locker Scores Another Upgrade As New Basketball Releases Resonate
Foot Locker Added To 'Best Ideas' List At Wedbush
Photo courtesy of Nike.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.