Friday turned out to be a nightmare for shareholders of Foot Locker, Inc. (NYSE:FL), after the sports apparel chain released second-quarter earnings that failed to live up to Wall Street’s expectations. Foot Locker shares are falling about 26% as of this writing.
The company reported 2Q adjusted earnings per share of 62 cents on revenue of $1.701 billion, falling short of consensus estimates of 90 cents on sales of $1.8 billion. In addition, same-store sales (a key metric) of -6.0%, came in materially below the Street’s +0.8% estimate.
Adding fuel to fire, Piper Jaffray analyst Erinn Murphy is slashing her price target on FL to $35.00 (from $60.00), while reiterating a Neutral rating on the stock. (To watch Murphy’s track record, click here)
Murphy commented, “From our perspective, we believe at the crux of some of the issues plaguing FL are two drivers: 1) consumers shifting more towards digital platforms for their purchases (to wit, over 100% of all dollar growth came from vendor DTC in athletic); 2) we are in the midst of a brand leadership rotation (from Nike to adidas). These two factors combined will likely weigh on traffic & margins for FL. Our FY18 EPS estimate moves from $5.00 to $3.90 as comps are forecasted to be down (4%)-(3%) in 2H and gross margins are expected to be down triple digits and SGA, despite efforts to lessen cost burden will still deleverage.”
“We remain cautious on domestic athletic retailers given intensifying consumer shift to vendor DTC platforms (stores and digital),” the analyst concluded.
Out of the 15 analysts polled by TipRanks in the past 3 months, 7 rate Footlocker stock a Buy, while 8 rate the stock a Hold. With a return potential of 81%, the stock’s consensus target price stands at $63.20.