Market Overview

Wells Fargo Upgrades Foot Locker On Nike Developments, Projects Comp Acceleration

Wells Fargo Upgrades Foot Locker On Nike Developments, Projects Comp Acceleration
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After Nike, Inc. (NYSE: NKE)’s launch of new advertising and an improved brand assortment, Wells Fargo is turning bullish on partner Foot Locker, Inc. (NYSE: FL)

The Analyst

Wells Fargo's Tom Nikic upgraded Foot Locker from Market Perform to Outperform and raised the price target from $50 to $58.

The Thesis

Headwinds tied to the Jordan brand and Europe have abated for Foot Locker, Nikic said in the upgrade note. (See his track record here.)

“As a result, we believe FL will show accelerating positive comps in the second half (2 percent in Q3 and 3 percent in Q4) and we believe sustained improvement in the Nike assortment can drive 3-4-percent comp growth over the subsequent 12-24 months (even if their second-largest supplier Adidas were to turn negative),” the analyst said. 

While noting the debate surrounding Nike's product distribution to Foot Locker, Nikic highlighted the following points Monday:

  • Foot Locker’s struggles in recent years were directly related to growth deceleration at; therefore, Foot Locker’s issues were product-based rather than channel-based.
  • Only 40 of Nike’s 30,000 wholesale partners were considered strategic partners, “and one of them is FL (with NKE management continually expressing FL’s importance to the brand — as evidenced by recent initiatives within FL’s stores and recent exclusive product launches),” Nikic said.
  • Nike’s reduction in wholesale partners presents a huge market share opportunity for partners such as Foot Locker.

Price Action

Foot Locker shares were up 2.7 percent at $48 premarket Monday.

Related Links

What The Kaepernick Campaign Means For Nike

Retail Analyst: Foot Locker, Skechers And Steve Madden Poised To Run Higher

Photo by Dwight Burdette/Wikimedia. 

Latest Ratings for FL

Nov 2018CitigroupMaintainsBuyBuy
Nov 2018Credit SuisseMaintainsOutperformOutperform
Nov 2018JefferiesMaintainsBuyBuy

View More Analyst Ratings for FL
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