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Foot Locker (FL) Earnings Preview

by | Aug 15, 2021

Foot Locker (FL) reporting earnings on Friday before the open with the Street looking for $1 on $2.08B in sales. Next quarter is guided to $1.17 and $2.09B while the FY is $5.67 and $8.57B. FL shares have closed lower in six of the last nine with an average target for shares of 5.33% and a max move of 18.91%. The current implied move is 6.26%. FL is back at the 200-day MA, a key spot of support, and the 23.6% Fibonacci retracement of the big weekly trend from the 2020 lows. Shares have room back to $60 out of this bigger weekly channel and measured move higher to $70-$75. Options flow has been bullish too with buyers active in the August $53, $56 and $57 calls last week, the November $62.5 calls, and January $70 calls.

The $5.77B company trades 9.5X earnings, 0.68X sales, and 4.22X FCF with a 1.45% yield. FL is seeing better results recently as the reopening as boosted foot-traffic in their stores while athleisure/fitness consumer trends have boosted demand. The company continues to see less promotional activity than in 2019 which is driving better margins and they should continue to manage inventory well which positions them strong into the 2H and back-to-school. FL recently acquired Atmos for $360M, a digitally led, global retailer headquartered in Japan. They also bought WSS for $750M, a US-based athletic footwear and apparel retailer. The deals expand their global footprint and customer base with a focus on community connectivity. Analysts have an average target for shares of $60 and a Street High $82. Deutsche Bank with short-term catalyst buy rating on 8/11 after underperformance over the past three months creates a favorable setup and the stock could see a substantial move with a strong quarter. Goldman starting at Buy on 7/22 and likes Foot Locker’s strong omnichannel presence, solid pipeline of new fashion and attractive valuation. The company is likely to see ongoing share consolidation from undifferentiated competitors. Hedge fund ownership fell marginally. Short interest is 4.4% and down from 11% in September.

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