Why Foot Locker Is One Mall Stock That May Not Get Shuttered

Foot Locker, Inc. FL shares fell significantly, over 17 percent from last Thursday into Friday, after the first-quarter earnings report miss last week.

Citi's 4 Reasons To Buy

Despite retails notable struggles recently, Citibank analyst Kate McShane does not view Foot Locker as a typical retail story, placing a Buy rating on the company following the pullback.

McShane outlined four reasons to buy Foot Locker on the pullback:

1. "FL is another example of a stock declining signif. more than the EPS adjustments, creating a buying oppty in our view at 10.4x fwd P/E (vs. 13.4x pre-earnings)."
2. "FL continues to outperform the majority of mall retailers w/positive comp trends and accelerating traffic through Q1."
3. "Investors remain concerned about a downturn in the athletic ‘cycle’ though we continue to see better trends vs. traditional brown shoe — not that ASPs were up +MSD."
4. "FL’s dividend pays investors to wait for the next catalyst.

Citi lowered its price target on Foot Locker from $91 to $82.

Wedbush's Outperform Rating

Wedbush analyst Christopher Svezia took a similar approach on Foot Locker, reiterating an Outperform rating, but did cut the price target to $72 from $83.

Svezia believes Foot Locker got knocked down but is still not out, with a strong product pipeline and the company’s ability to manage its operating model.

“We are mindful of the 17 percent fall in the stock on Friday, but we believe 2Q17 is achievable and likely a reiteration of its outlook should be positive for the stock from these levels. FL saw a similar situation into 1Q last year and in short order was able to outperform – we don’t see this as any different,” said Svezia.

Baird's Bullish Take

Baird Equity research noted the market may have overreacted to the first quarter and stated Foot Locker is in a similar situation to what shares saw at the same time last year.

“FQ1 disappointed and a slowdown in April and implied into May sparked concerns about broader trends. However, slower comps should prove temporary with continued strength for adidas AG(ADR) ADDYY and Puma AG Dassler Sport, and perhaps a resurgent Nike Inc NKE supporting visibility to a 2H acceleration,” said Baird analyst Johnathan R. Komp.

Baird maintains an Outperform rating on Foot Locker, but lowered its price target from $85 to $77.

Related Links:

Foot Locker: A Race To Exit After Q1 Miss