3 Things Wall Street Is Saying About Foot Locker Ahead Of Q1

For multiple consecutive quarters, Foot Locker Inc. has been unstoppable.

But will Q1 — which the firm will report on Friday — be the quarter of deceleration?

For the most part, market watchers’ concerns about Foot Locker, which owns several banners, including Champs, Footaction and its elevated women’s concept Six:02, center on the impact of a basketball slowdown.

“Investors continue to be concerned by the potential for a slowdown in the overall basketball category, as well as the potential impact from lower-priced basketball styles [like the Curry at $130] taking a bigger share of wallet at the expense of higher-price basketball shoes [such as the Nike marquee styles for LeBron, Kobe and Kevin Durant],” Citi Research analyst Kate McShane wrote on May 10.

While NBA superstar Stephen Curry has fueled mega excitement for the Under Armour’s basketball business, by and large, an overwhelming sentiment during the past year or so has been that the category has seen better days.

Although Foot Locker’s share price slipped to a 52-week low of $57.23 Friday — likely buoyed by larger market factors impacting multiple retail stocks last week — analysts have generally maintained a bullish posture on the company.

Consensus estimates peg the firm’s first-quarter sales at $2 billion, representing 4.4 percent year-over-year growth. Diluted earnings per share are expected to gain 7.8 percent, to $1.39.

Here are three things market watchers are saying ahead of Q1.

The Truth About Hoops

“Foot Locker’s current valuation reflects the well-known concerns around basketball but ignores other outweighing factors, including: broad category tailwinds driven by an innovative product pipeline from multiple brands; diversifying business mix; remodels; relatively insulated consumer; gross margin expansion; and active capital return strategy. All these factors combined will help Foot Locker drive sustainable top- and bottom-line growth.” — Canaccord Genuity Inc. analyst Camilo Lyon

A Realistic View On The Quarter

“Q1 [is the] lowest growth quarter … We maintain our $1.38 EPS (up 6.5 percent) and 4 to 5 percent comp [gains] … Recall one-time headquarter costs (overlapping rent of $4 million) may drive de-leverage likely offset by gross margin gains.”— Susquehanna Financial LLLP analyst Christopher Svezia

First-Quarter Best Sellers

“We are confident that the strength of casual athletic, Adidas, and Brand Jordan and UA basketball footwear sales more than offset any weakness in the Nike signature basketball sales, and is positive the footwear business at Foot Locker.” — Sterne Agee CRT analyst Sam Poser

“…the launch calendar has been healthy with multiple Jordan Retro launches coupled with new styles for Curry 2, Adidas Ultra Boost and Kyrie 2.” — Lyon

“Running and casual athletic footwear should be standouts, while Europe likely leads regional growth.” — Svezia

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