On Thursday, Telsey Advisory Group adjusted its price target for Foot Locker (NYSE:FL) shares, raising it to $27 from the previous $26, while maintaining a Market Perform rating. The revision follows Foot Locker's first-quarter 2024 performance, which displayed sequential improvement in comparable store sales and reduced markdown activity. The positive trend is attributed to leaner inventories and stronger product sell-through from brands such as Nike (NYSE:NKE), Hoka, New Balance, Asics, and adidas.
Foot Locker has also provided guidance for the second quarter of 2024, anticipating flat to low single-digit positive comparable store sales, which is more optimistic than the FactSet consensus of 0.3%.
This forecast marks a potential shift to positive territory after five consecutive quarters of declining comps. The company's specific advancements in digital platforms, customer service, and merchandising strategies are contributing to these sequential improvements.
Looking ahead, expectations for a return to positive comparable store sales in the second quarter and growth with Nike in the fourth quarter of 2024 are bolstering the outlook for Foot Locker. These factors are reinforcing confidence in the company's ability to meet its full-year 2024 guidance.
Nevertheless, Foot Locker is observed to be ceding market share to competitor Dick's Sporting Goods (NYSE:DKS), which has enhanced its footwear offerings. Despite this, Foot Locker boasts a more extensive selection of basketball and children's shoes.
The stock price target increase to $27 is based on applying an 11 times price-to-earnings (P/E) multiple, which aligns with Foot Locker's ten-year average, to the firm's 2025 earnings per share estimate of $2.45, a slight decrease from the previous $2.55 estimate.
The updated valuation reflects the firm's measured optimism about Foot Locker's near-term business prospects and its ability to achieve sustained growth and operating margin expansion over the next two to three years.
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