On Tuesday, Citi raised the price target for Foot Locker (NYSE:FL) shares from $20.00 to $22.00, while keeping a Sell rating on the stock. The firm's analyst predicts Foot Locker will surpass fourth-quarter earnings per share (EPS) expectations when results are released before the market opens next Monday, citing stronger than anticipated comparable store sales.
The analyst anticipates that Foot Locker's fourth-quarter comparable sales will decline by 6%, which is more favorable than the consensus estimate of an 8% decline. The upcoming earnings report is expected to draw investor attention to Foot Locker's fourth-quarter inventory levels and the initial fiscal year 2024 guidance. The guidance is projected to be cautious due to the ongoing challenges the business faces, including multiple guidance reductions in fiscal 2023.
The firm forecasts that Foot Locker will set its fiscal 2024 EPS guidance in the range of $1.50 to $1.80, compared to the consensus expectation of $1.89. This outlook is based on the assumption of a low single-digit decline in comparable store sales, contrary to the consensus projection of a 1% increase.
Inventory levels at the end of the fourth quarter are expected to be relatively clean, with an estimated 1% decrease. However, the firm expresses concern over Foot Locker's ability to increase sales in fiscal 2024, especially considering the heavy promotional activity that drove sales in fiscal 2023.
Another significant point of interest for investors will be Foot Locker's strategy to grow alongside Nike (NYSE:NKE) in fiscal 2024. This is particularly important as approximately 64% of Foot Locker's sales are derived from Nike products, highlighting the retailer's dependence on the brand. The firm concludes that at current stock price levels, the risk/reward balance for Foot Locker is tilted towards the downside.
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