Foot Locker stock target cut to $20 at Telsey Advisory Group

On Thursday, Telsey Advisory Group analyst Cristina Fernandez revised the price target on Foot Locker stock, trading on the New York Stock Exchange (NYSE:FL), from $24.00 down to $20.00, while keeping a Market Perform rating on the shares. The adjustment follows Foot Locker’s fourth-quarter results for 2024, which, despite being solid, presented a 2025 outlook that did not meet the firm’s expectations. The lowered forecast is attributed to anticipated declines in total sales and operating margin. According to InvestingPro data, the stock has already declined over 30% in the past six months, with two analysts recently revising their earnings expectations downward. InvestingPro offers 5 additional key insights about Foot Locker’s outlook.

Foot Locker has been undergoing a transformation over the last two years, diversifying its product mix and increasing sales from non-Nike brands to approximately 40%. This strategy led to the company reporting low single-digit comparable store sales growth for the third consecutive quarter. With annual revenue of $7.99 billion and a gross margin of 29.07%, the company maintains stable operations despite challenges. However, InvestingPro’s analysis indicates a weak overall financial health score, suggesting the transformation still faces headwinds. Store closures and ongoing investments continue to affect sales performance.

The company is currently in its third year of a turnaround initiative under CEO Mary Dillon. A key part of this strategy involves a shift in store operations and a substantial investment into a "reimagined" store concept. Foot Locker plans to open 80 of these modernized stores in 2025, a significant increase from the 8% of stores opened in 2024.

The new store concept is expected to contribute to stronger comparable sales in 2026 and 2027. However, Telsey notes that Foot Locker’s progress towards its 2028 operating margin goal of 8.5% to 9.0% continues to be delayed. The retailer would need to achieve mid-single-digit comparable sales growth to leverage expenses effectively, a performance level that has eluded the company since 2016, with the exception of the pandemic period.

In other recent news, Foot Locker reported its first-quarter 2025 earnings, highlighting a notable earnings per share (EPS) beat, though revenue fell short of expectations. The company achieved an EPS of $0.86, surpassing the forecast of $0.72, while revenue reached $2.24 billion, missing the anticipated $2.32 billion. These results reflect effective cost management but suggest potential challenges in driving sales. Analyst firms have adjusted their outlooks on Foot Locker, with Jefferies, BofA Securities, and Williams Trading all reducing their price targets to $19, $20, and $18, respectively, while maintaining Hold or Neutral ratings. Analysts at these firms expressed concerns about Foot Locker’s competitive position, particularly in light of Nike (NYSE:NKE)’s promotional strategies and the potential market share loss to competitors like JD Sports and Dick’s Sporting Goods (NYSE:DKS). Despite these challenges, Foot Locker’s management remains optimistic about future growth, particularly through its partnership with Nike and other performance brands. The company’s strategic focus includes cost savings, store refreshes, and diversifying its brand portfolio beyond Nike. Investors are closely monitoring Foot Locker’s performance, especially regarding its sales recovery with Nike and the impact of normalized channel inventory levels on financial outcomes.

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