Foot Locker Drops 9% On Weak 4Q Revenues

Foot Locker closed 8.8% lower on Friday after the athletic apparel and footwear retailer reported weaker-than-expected fourth quarter revenues, reflecting lower comparable-store sales (comps). However, 4Q earnings came in ahead of the Street’s estimates.

Foot Locker’s (FL) 4Q revenues declined 1.4% year-over-year to $2.19 billion and missed the Street’s estimates of $2.29 billion. Comps fell 2.7% versus analysts’ expectations of 4.9% growth, largely driven by COVID-19 related store closures.

Adjusted earnings of $1.55 per share exceeded analysts’ expectations of $1.27 per share but declined 4.9% from the year-ago period. However, gross margin improved by 160 basis points in 4Q.

Commenting on the gross margin expansion, the company’s CEO, Richard Johnson, said, “Our customers responded well to our solid product offering and exciting holiday campaign, which drove stronger margins and continued acceleration of our digital business.” (See Foot Locker stock analysis on TipRanks)

Following the results, Pivotal Research analyst Mitch Kummetz maintained a price target of $61 (27% upside potential) and reiterated a Buy rating on the stock.

In a note to investors, Kummetz said, “FL is bullish on its product pipeline and the prospects for demand to remain strong, especially if stimulus passes. We’re not surprised that FL has sold off today on the comp miss, but as the company’s prospects remain solid, we view this as a buying opportunity.”

Footlocker has a Moderate Buy analyst consensus rating based on 9 Buys and 6 Holds. The average analyst price target of $57.31 implies upside potential of about 19% to current levels.

However, TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Foot Locker is currently Very Negative as 5 hedge funds decreased their cumulative holdings in FL by almost 710K shares in the last quarter.

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