Foot Locker (FL) Rallies More Than 28% in 6 Months: Here's Why
Foot Locker, Inc. FL appears encouraging, thanks to its robust business strategies. The company is effectively managing inventory, investing in digital platforms and improving supply-chain efficiencies. Management has been reinforcing the company’s digital presence and direct-to-consumer (DTC) operations. Its FLX membership program also appears commendable. Impressively, shares of this athletic footwear and apparel company have appreciated 28.6% over the past six months, outperforming the industry’s 17% growth.
Additionally, analysts look optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is pegged at $8.57 billion and $4.25, respectively. These estimates suggest year-over-year growth of 2.3% and 16.5%. A Value Score of A highlights the strength of this Zacks Rank #3 (Hold) stock.
Let’s Delve Deeper
Foot Locker’s digital business has been performing well. During fourth-quarter fiscal 2022, the company’s digital sales penetration rate was 17%. The company is on track to bolster its omnichannel capabilities by adding new functionalities. It has activated a Shop My Store feature on its website. Moreover, the company added Apple Pay and Google Pay to digital payment options for providing greater flexibility, as well as convenience to customers. Apart from these, the company is enhancing buy online and pickup in-store capabilities as well as elevating its mobile app experience. The company looks forward to being the best-in-class omnichannel retailer, targeting digital penetration of above 25%.
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Foot Locker is trying to improve its performance through operational and financial initiatives. In this regard, management has been accelerating efforts including greater diversification of merchandise and vendor mix, the rollout of the important growth banners, advancement of omnichannel endeavors and implementation of the cost-savings program. Its cost-optimization program is on track. Management had unveiled a $200 million cost-saving program opportunity. Since then, the company has identified another $150 million of savings from merge margin and occupancy through its IGNITE work. Thus, Foot Locker now has a $350 million cost savings program.
In addition, Foot Locker is progressing well with its membership program FLX which inspires customers to remain within the Foot Locker portfolio of banners. The FLX program continues to exhibit momentum and helps the company serve customers in an efficient manner. Management remains encouraged to continue refining FLX globally. FLX will offer exclusive products and service access with benefits for members only.
The new FLX program will be highly simple and transparent in design. In the fall of 2023, management will pilot the new FLX loyalty program to gain learnings and fine-tune processes. As the company moves into 2024, it will launch the new FLX program in all its North American banners building on the learnings, and in 2025, it will expand FLX to the international markets to achieve a full-scale impact in Europe and Asia Pacific. The company also deepens its relationship with customers by reimagining the loyalty program, thus growing sales penetration of loyalty from 25% to 50% by 2026 and later to 70% in the long term. International expansion is another catalyst.
Overall, the company is focused on driving growth in its portfolio by building more distinction among banners, shutting underperforming stores, expanding off-mall footage to above 50% in North America and increasing the new format footage to more than 20%. It looks forward to accomplishing revenues of over $10 billion and surpassing the EBIT margin of 10% in the long run. It also targets the global Foot Locker brand to grow at a mid-single-digit CAGR, with over $6 billion in sales by 2026.
Thus, Foot Locker appears well-poised for growth due to the aforementioned strengths.
Solid Picks in Retail
We have highlighted three top-ranked stocks, namely Abercrombie & Fitch ANF, American Eagle Outfitters AEO and Boot Barn BOOT.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 1.6% and 33.1%, respectively, from the year-ago reported figures. ANF delivered a negative earnings surprise of 141.3% in the last reported quarter.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23.3% in the last reported quarter.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 3.4% and 3.2%, respectively, from the year-ago reported figures.
Boot Barn, a fashion retailer of apparel and accessories, currently carries a Zacks Rank of 2. The company has a trailing four-quarter earnings surprise of 8.7%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 8.2% and 9.1%, respectively, from the year-ago reported figures.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
Foot Locker, Inc. (FL) : Free Stock Analysis Report
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
