On Friday, Barclays (LON:BARC) adjusted its outlook on Foot Locker (NYSE: NYSE:FL), increasing the price target to $27 from the previous $22 while keeping an Equal-weight rating on the shares.
The update came after Foot Locker's first-quarter 2024 earnings report, which showed performance largely in line with expectations, including an earnings per share (EPS) beat. The positive results were partly due to a shift in selling, general, and administrative (SG&A) expenses in the second quarter.
Foot Locker's comparable store sales showed improvement throughout the quarter, trending flat to slightly up. The company's optimism for the latter half of the year is supported by several initiatives, including the U.S. launch of the FLX Rewards program, store remodels, a new mobile app, expected growth with Nike (NYSE:NKE), and a revised merchant and buying structure aimed at enhancing back-to-school sales.
Despite these developments, Barclays noted that the company's full-year guidance remains unchanged, suggesting that the positive market reaction, which saw Foot Locker shares close up 15.5% following the earnings announcement on May 30, 2024, might have been influenced by previously overly negative investor sentiment.
The firm acknowledged the stabilization in Foot Locker's business but pointed out uncertainties related to the company's ability to recover margins lost to last year's promotions, the sustainable growth of the Champs brand, and the execution of long-term sales and earnings targets.
InvestingPro Insights
Foot Locker's recent earnings report has prompted Barclays to revise their price target, and in the wake of this development, InvestingPro data provides further context for investors. The company's market capitalization stands at a robust $2.45 billion, with a noteworthy price-to-book ratio of 0.85 as of the last twelve months ending Q4 2024, indicating that the stock may be undervalued relative to its assets. Additionally, despite a decline in revenue growth of -6.75% over the same period, Foot Locker has demonstrated a strong price performance with a one-month total return of 24.17%.
InvestingPro Tips highlight Foot Locker's high shareholder yield and the expectation of net income growth this year, which could signal a positive outlook for investors. On the other hand, the fact that five analysts have revised their earnings downwards for the upcoming period introduces an element of caution. For those seeking a deeper analysis, more InvestingPro Tips are available, offering a comprehensive understanding of Foot Locker's financial health and future prospects. Subscribers can access these additional insights by visiting https://www.investing.com/pro/FL and can enjoy an extra 10% off a yearly or biyearly Pro and Pro+ subscription with the exclusive coupon code PRONEWS24.
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