Is It Time to Step Back into This Retailer's Stock?

Key Points

• Foot Locker is a global footwear and apparel retailer with over 2,600 stores in 26 countries.
• Foot Locker strengthened its partnerships beyond Nike to include ASICS, On Running, Adidas, and Deckers.
• Foot Locker pleased investors with its Q1 2024 EPS, beating estimates by 10 cents. This caused shares to spike to $29.72 before settling back down.

Foot Locker Inc. NYSE: FL is a footwear and apparel retailer operating under its flagship Foot Locker, Kids Foot Locker, Champs Sports, WSS, and Atmos brands. The company operates over 2,600 stores worldwide across North America, Asia, Europe, Australia and New Zealand. They embrace the sneakerhead culture with their stores, often located in malls and strip centers. Shares have been punished due to weak forecasts from Nike Inc. NYSE: NKE. Foot Locker stocks are trading down 20.6% year-to-date (YTD).

Foot Locker operates in the retail/wholesale sector, competing with footwear retailers, including Dick’s Sporting Goods Inc. NYSE: DKS, Macy’s Inc. NYSE: M,  Hibbett Inc. NASDAQ: HIBB and Big Five Sporting Goods Co. NASDAQ: BGFV.

Foot Locker Expands Its Footprint Worldwide

In addition to its namesake Foot Locker stores, the company expanded its worldwide footprint by acquiring Eurostar (WSS) with 93 off-mall stores for $750 million. WSS has domestic stores in Texas, Arizona, Nevada, and California. Foot Locker also acquired Japanese retailer Atmos for $360 million. Atmos offers premium footwear in 49 stores, including 39 in Japan. It also operates Atmos Pink brands. The Atmos acquisition will enable Foot Locker to expand in the Asia-Pacific market. These acquisitions occurred in late 2021.

Nike Forces Foot Locker to Diversify

Foot Locker is a big seller of Nike sneakers and athletic apparel. When Nike decided to focus more on its direct-to-consumer (DTC) channel over its wholesale business in 2022, Foot Locker shares were punished. Nike has since expressed that it has no intention of breaking its partnership. In fact, they have formed a renewed and revitalized relationship with Nike in 2023. The company has expanded its partnerships with various brands, learning the lesson of not putting all their eggs into one basket. Foot Locker now has partnerships with On Holdings AG (NYSE: ONON), Deckers Outdoor Co.  NYSE: DECK, ASICS Co. OTCMKTS: ASCCF, and Adidas AG OTCMKTS: ADDYY.

FL Stock is in a Descending Triangle Pattern

The daily candlestick chart on FL illustrates a descending triangle pattern. The pattern is comprised of the falling trendline that formed off $28.60 on June 3, 2024, representing the lower highs to the flat-bottom lower trendline at $22.75. The second breakout attempt was pulled back down into the triangle.

The daily relative strength index (RSI) is stalled at the 52-band. Pullback support levels are at $24.37, $22.75, $20.47, and $18.55.

Foot Locker Surprises Critics With a Robust Q1 2024

Foot Locker impressed analysts with its Q1 2024 EPS of 22 cents, beating consensus estimates by 10 cents. Revenues fell 2.8% YoY to $1.87 billion, just shy of the $1.88 billion consensus estimates. Comparable sales Dell by 1.8% YoY, including a 220 bps impact from the continued repositioning of its Champs Sports banner. Global Foot Locker and Kids Foot Locker comparable sales rose 1.1% YoY. Inventory fell 5.6% YoY.

Beyond Nike: Foot Locker Gains on New Partnership Brands

Foot Locker downplayed Nike and talked up sales of its partner brands. The ASICS brand exhibited strong global momentum. On and Hoka sneakers were expanded in its stores, increasing allocations to meet the high demand. Foot Locker doubled its Hoka (Deckers) business in Q1 2024. The company will share its consumer insights to help sustain growth with Hoka. On's Running business had positive trends as the On Running brand became popular with a younger and more diverse customer base, notably its Cloudmonster and Cloudtilt franchise brands. Adidas continued to drive sales growth into the holiday season. Nike's innovation pipeline was exciting and supported by powerful storytelling.

Foot Locker Reaffirms Guidance

Foot Locker issued full-year 2024 EPS guidance of $1.50 to $1.70 versus $1.56 consensus estimates. Full-year 2024 revenues are expected to be between down and up 1% YoY to $9.09 to $8.25 billion versus $8.12 consensus estimates. Following its earnings release, Foot Locker stock gapped to a higher of $29.72, but shares fell back to a low of $22.75.

Foot Locker CEO Mary Dillon commented, "Through our Lace Up Plan, we are strengthening our brand partnerships, enhancing customer engagement through digital and loyalty investments, and solidifying our position at the intersection of basketball and sneaker culture. In stores, we are elevating the customer experience through store refreshes and our newly unveiled retail concept, which recently opened in Wayne, New Jersey, with four more locations opening this year.”

Foot Locker analyst ratings and price targets are at MarketBeat. There are 16 analyst ratings, comprised of three Buys, ten Holds, and three Sells.