As Nike Rebounds, So Does Foot Locker, Says Bullish Jefferies

With the fourth quarter almost in the books, Jefferies sees several encouraging signs from Foot Locker, Inc. FL.

The Analyst 

Jefferies analyst Janine Stichter maintains a Buy rating and raises her price target from $62 to $67.

The Thesis

Foot Locker’s business continues to gain momentum due to a Nike Inc NKE resurgence in North America, a healthy innovation pipeline, a comeback in basketball footwear and controlled promotions, Stichter said in a Friday note. 

Nike’s Air Max and Air Force have seen significant search growth on Foot Locker’s website year-over-year, the analyst said. 

Searches for the Air Max account for 1.5 percent of traffic on the footwear retailer's website, a 125-basis point surge year-over-year, according to Jefferies. 

Smaller brands are also starting to make a meaningful contribution — most notably Fila with its Disruptor 2, a key womens style, Stichter said. 

“We like the steps FL is taking to diversify its assortment, growing its mix of smaller brands such as Fila, Vans, UGGs, K-Swiss and Champion, catering to customer demand for these labels." 

Foot Locker shares have performed well lately, but an opportunity still exists with the valuation being low historically and in comparison to peers, Stichter said. 

Basketball footwear has been struggling for several years now, particularly Jordan, which has been a major headwind for Foot Locker, the analyst said — but data points to improvement in the category.

Searches related to basketball is rising year-over-year and the massive release of the Jordan 11 Retro Concord continues to sell at a premium in the resale market, the analyst said. 

“We believe basketball should continue to move closer to positive in Q4, especially as changes to Jordan distribution are lapped." 

Price Action

Foot Locker shares were up 0.29 percent at $56.78 at the time of publication Friday. 

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Photo by Dwight Burdette/Wikimedia.