Goldman Sachs analyst Kate McShane has maintained their bearish stance on FL stock, giving a Sell rating yesterday.
Kate McShane’s rating is based on a detailed analysis of Foot Locker’s financial outlook and strategic positioning. Despite the company’s adjusted earnings per share (EPS) for the fourth quarter of 2023 surpassing expectations, McShane remains unconvinced by the company’s future performance. The guidance for the fiscal year 2024 forecasts EPS below consensus, indicating limited earnings growth. Furthermore, McShane expresses concerns over the sustainability of the company’s market share in light of recent changes to Nike’s allocation, which could pose significant challenges for Foot Locker.
Additionally, McShane points out that while Foot Locker has seen some initial benefits from its Lace Up strategic plan, the required investments to improve the business are likely to exert pressure on EPS growth. This could be detrimental to the company’s valuation, which is already trading at a premium compared to its historical average price-to-earnings (PE) ratio. With the long-term earnings before interest and taxes (EBIT) margin target also being deferred, there’s an implication that profitability improvements may take longer than initially anticipated. Based on these factors, McShane concludes that Foot Locker’s stock warrants a Sell rating.
In another report released yesterday, CFRA also downgraded the stock to a Sell with a $18.00 price target.
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Foot Locker (FL) Company Description:
Foot Locker, Inc. engages in the retail of athletic shoes and apparel. It operates through the Athletic Stores and Direct-to-Customers segments. The Athletic Stores segment sells athletic footwear and apparel under the Foot Locker, Lady Foot Locker, SIX:02, Kids Foot Locker, Champs Sports, Footaction, Runners Point, and Sidestep brands. The Direct-to-Customers segment includes Footlocker.com, Inc., Eastbay, Inc., and international electronic commerce businesses. The company was founded on April 7, 1989 and is headquartered in New York, NY.
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