Citi Names 'Controversial' Foot Locker As Its Top Footwear, Apparel Pick

Foot Locker Inc FL has done the unthinkable.

After suffering through an abysmal 2017, the footwear retailer has climbed to the top of Citi’s Buy list for 2018.

The Analyst

Kate McShane of CitiBank reiterated a Buy rating on Foot Locker and raised the price target from $47 to $54.

The Thesis

Although shares have recovered ground following some notable upgrades, Foot Locker may now be an even more controversial play heading into 2018 given the uncertain athletic environment and the deterioration of comps and margins in 2017, McShane said in a Monday note. (See the analyst's track record here.) 

McShane said she came away from Foot Locker's Q3 report Nov. 17 results feeling better about Foot Locker for a host of reasons: comps that fell less than expected, an improved fourth-quarter outlook, increasing buybacks and investments in digital and new Nike Inc NKE partnerships.

“We point to these reasons for why we think EPS numbers will move higher for next year and are moving Buy-rated FL to the top of our apparel and footwear picks,” McShane said. 

Nike’s upcoming second-quarter report Dec. 21 is expected to give even more clarity for the Foot Locker thesis heading into 2018, the analyst said. 

The 800-pound gorilla that is, Inc. AMZN has played a significant role in the uncertainty of Foot Locker’s future. Analysts have gone back and forth as to whether the e-commerce giant will disrupt the entire industry, but now it appears that Amazon likely won't have a material effect on the footwear retailer.

“We think shares still look cheap relative to other retailers and think multiple expansion is possible given that the perceived secular pressures (Amazon and vendors going direct) are probably not as big of a threat as once thought, given new Nike Partnerships and an unlikely overlap in product with Amazon."

Price Action

Foot Locker shares remained relatively flat and were down slightly at $46.30 at the time of publication. 

Related Links:

With Dad Shoes In Fashion, Is Skechers Set For A Big 2018?

Canaccord Genuity: Foot Locker's Fortunes Are Turning Toward The Upside

Posted In: CitiFootwearKate McShaneretailPrice TargetReiterationAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.