UBS downgraded Foot Locker (NYSE:FL) shares to sell from neutral, cutting its price target on the footwear retailer to $30 per share from $36 per share. The new target implies downside of 25% from Tuesday’s close.
“Our conversations with investors suggest the market is too focused on potential margin recapture and not focused enough on downside risks to sales. To many, a recession significantly weighing on softgood sales is still a bear case. For us, it is a base case,” UBS said.
Analyst Jay Sole warned the retailer will struggle to meet revenue expectations in a recession, which is a headwind that is seen as not reflected in the current share price.
Foot Locker is also expected to face structural challenges due to increasing competition from strong athletic brands like Nike with their direct-to-consumer businesses that have cut into sales for the Champs chain and the namesake business.
On Thursday, CEO Mary Dillon, Executive Vice President & Chief Commercial Officer Frank Bracken and Interim Chief Financial Officer Robert Higginbotham will present at the J.P. Morgan ninth Annual Retail Round Up Conference.
Shares of FL fell 33 cents to $39.70 in early trading on Wednesday to slip below the 100-day moving average.
