Foot Locker (NYSE:FL) rose more Tuesday after Citi upgraded the retailer to “buy” from “neutral.” Citi said the company is moving in the right direction, turning attention away from malls and the Champs brand and instead focusing on offerings related to kids, loyalty and digital.
Nor did the favorable news end there: FL caught another upgrade on Tuesday with Evercore ISI pushing the mall retailer up to an Outperform rating from In Line.
Analyst Warren Cheng thinks Foot Locker CEO Mary Dillon and her management team articulated a thoughtful, credible vision that leans into the things that Nike, Adidas and Under Armour cannot do themselves as “monobrands”. The bullish view on Foot Locker is that it now has unique moats as a retailer. The forecast is for mid single-digit sales and high single-digit EPS growth following a significant reset in 2023 to a much healthier base.
"But equally importantly, we think Foot Locker will start to flip the script away from a disintermediation narrative to a grow-with-secularly healthy-sneaker-demand narrative. And with shares trading at just 9x forward EPS (and 5x target 2026 EPS), we see the potential for the multiple to expand to low-to-mid-teens (FL traded mid-to-high-teens prior to disintermediation concerns) as the model transforms in the coming quarters."
FL shares kicked off Tuesday hiked $1.51, or 3.8%, to $41.38.
