On Wednesday, Telsey Advisory Group maintained a Market Perform rating for Foot Locker (NYSE:FL) stock, with a steady price target of $27.00.
The firm's outlook comes after Foot Locker's shares experienced a 26% increase since the company's first-quarter report released on May 30, 2024.
The analyst noted that the stock's rise reflects expectations of positive comparable store sales (comp) in the second quarter of 2024 and an acceleration in the second half of the year.
According to Telsey, Foot Locker is poised to benefit from a diversified brand portfolio, with several brands such as adidas Originals, Asics, Hoka, New Balance, and On seeing strong demand.
Additionally, the relaunch of the FLX rewards program in the United States in June is expected to contribute positively. Despite these potential growth drivers, the firm expresses caution due to reports of more cautious consumer sentiment as the second quarter progressed.
The analyst expects that the second quarter will start to show benefits from year-over-year reductions in promotions. However, these benefits may be offset by one-time costs associated with the FLX program transition and ongoing investments aimed at enhancing the customer experience both in-store and online, as well as modernizing the brand. Telsey anticipates that Foot Locker will maintain its full-year earnings per share (EPS) guidance.
The price target of $27 is based on applying a price-to-earnings (P/E) multiple of 11 times, which aligns with the stock's ten-year average, to the firm's 2025 EPS estimate of $2.45.
In the upcoming earnings call, Telsey expects to gain insights into demand trends throughout the quarter by brand, concept, and product category, as well as the initial impact of the FLX program relaunch in the U.S., including membership sign-ups and conversion rates.
The firm is also looking for updates on the performance of new and remodeled stores and the progress of the transformation of the Champs sports banner.
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