Foot Locker catches two downgrades after earnings day disaster (NYSE:FL)

Oct 05, 2023

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Foot Locker (NYSE:FL) lost multiple bulls on Monday as analysts assessed the earnings results that sent shares spiraling down nearly 30%.

Citi analyst Paul Lejuez was one such analyst, cutting his rating to Neutral and reeling in his price target to $30 from a prior $48. He added that the full-year forecast, while tempered, leaves open the possibility of further disappointments ahead.

"Given how volatile and economically sensitive their customer is currently, we would prefer management to take a more conservative approach to guidance," he wrote. "The same is true with management's approach to [the second half of 2023]."

Williams Trading took an even more openly bearish stance, shifting to Sell and slashing their price target to $25 from a prior $35. Like Lejuez, equity analyst Sam Poser advised that guidance is likely too aggressive given the quarterly trends flagged in its latest earnings report as well as his bearish stance on Nike, a key supplier for Foot Locker.

That said, the reviews of the latest earnings results were not universally negative. For example, Jefferies maintained its Buy rating on the stock despite the earnings day slide.

"With a healthy balance sheet, strong relationships with key suppliers, and new product offerings through private label and collaborations with other brands, we see FL benefiting

from the general strength in the athletic footwear and apparel space," the firm's analyst advised. "We believe the company has an attractive opportunity to reposition itself over the next several years and expect the company to continue to execute upon the 4 key pillars of its Lace Up plan."

The team maintained a Buy rating, but cut their price target to $37 from a prior $47. Foot Locker (FL) stock dipped 2.37% in premarket action on Monday, adding to a deep post-earnings plunge.

Elsewhere, Oppenheimer offered a take on the implications of the Foot Locker print for many of its peers, such as Dick's Sporting Goods (DKS) and Hibbett (HIBB).

"In our view, while macro-conditions are now more challenging, at least somewhat, recent sales and profit issues at FL appear largely company-specific, and self-inflicted," the firm's analysts wrote. "As indicated previously, for select, leading, well-positioned operators, depressed valuations likely discount for near-term fundamental choppiness, while improved strategic-positioning and enhanced digital tool sets should allow for more profitable, stronger market share gains, as sector malaise abates."

As such, the team maintained a Buy rating on both Dicks Sporting Goods (DKS) and Academy Sports and Outdoors (ASO).

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