Wall Street is starting to pay attention to Foot Locker

Wall Street is starting to pay attention to Foot Locker (FL) again. Its shares rose sharply last week after strong financial results.

The athletic footwear and apparel retailer reported non-GAAP third-quarter earnings of $1.27, higher than analysts’ estimates. In addition, same-store sales increased 0.8% on top of last year’s record sales levels, driven by strong demand, the company’s brand diversification efforts and better access to high quality stocks.

Additionally, Foot Locker raised the 2022 EPS forecast to $4.42-$4.50, up from the previous range of $4.25-$4.45. This is a welcome surprise in today’s difficult macroeconomic environment.

“Foot Locker’s strong third quarter results during the ongoing macroeconomic challenges speak to the strengths of this organization which I am honored to lead now,” said Mary Dillon, president and chief executive officer, in a statement after the publication of the third quarter results. “Despite the challenging environment, our growing customer base remained resilient, and I’m proud that our team delivered sales above our expectations, thanks to their exceptional execution.”

Wall Street liked what it saw in Foot Locker’s financial report, sending its shares up nearly 9% in the regular trading session after the financial results were released.

That’s a significant difference from a year ago, when a similar display failed to impress Wall Street. Then, shares of the athletic shoe company fell 8.4% after the third quarter 2021 financial results were announced.

Over the past 12 months, the company’s shares have lost 21.90% of their market value, lagging the broader market, which has lost 14.30%.

Foot Locker’s shares were held back by supply chain issues and concerns over its relationship with Nike. The sportswear leader has changed its business model from an indirect business model to a direct business model, raising fears on Wall Street that Nike could sever its ties with Foot Locker.

But Quo Vadis chairman John Zolidis, a long-time follower of the company, believes Foot Locker will survive the transition from a near-Nike exclusive distribution channel to a successful multi-brand retailer.

Zolidis is a fan of newly appointed CEO Mary Dillon, who sees something in the company’s potential that the street can’t. And he thinks the company’s valuation is incredibly low (7x P/E and 3x EV/EBITDA, unadjusted for GOAT participation).

Additionally, he notes that the stock has very few sell-side supporters due to intense investor skepticism. And it could see the company’s shares make significant gains if the market gets behind Ms Dillon’s yet-to-be-articulated plan.

In addition, Zolidis appreciates the Company’s advice.

“We’re still pleased that business isn’t terrible and to see indications that the company is in control of its business and its trends,” he said in a research note after the company’s financial results were released. in the third trimester.

A man buys shoes at a Foot Locker store in New York.
REUTERS/Shannon Stapleton

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