Foot Locker, Inc. FL valuation may be attractive looking out 6–12 months, but near-term fundamentals and low visibility have Baird Equity Research analysts suggesting caution heading into Friday’s earnings report.
Shares of the premium retailer have fallen 32 percent year to date on a difficult retail and environment and on potentially overplayed fears regarding Amazon.com, Inc. AMZN partnership with Nike Inc NKE. Back-to-school discounting may be weighing on short-term fundamentals, however, according to a recent interview with Matt Powell of NPD Group, the footwear analyst said that this back to school season is the most promotional he has seen in 17 years.
With many valuation metrics near all-time lows, Baird Equity Research analyst Jonathan R. Komp indicated that the firm could be more aggressive buyers of the company post-report.
“We expect the near-term pressures to sustain through the end of August, before potentially rebounding quickly as Nike regains its footing, Adidas sustains its brand heat, and other factors align better, including potentially less pressure from performance basketball. We believe this potential for a top-line reacceleration remains the key fundamental reason not to abandon FL,” said Komp.
“We would tread cautiously ahead of the FQ2 report, but also stand ready to become more aggressive buyers thereafter based on prospects for improving fundamentals,” said Komp.
Baird Equity Research maintains its Outperform rating on the company but lowered its price target from $77 to $65 ahead of earnings.
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