Foot Locker's (FL) Growth Strategies Appear Encouraging
Foot Locker, Inc. FL has been doing well on the bourses, thanks to its robust business strategies. The company is effectively managing inventory, improving supply-chain efficiencies and reorganizing its corporate structure. It is focused on boosting customer experience, investing in long-term growth and driving productivity. Foot Locker's cost-optimization program is on track.
Thanks to such drivers, shares of this Zacks Rank #3 (Hold) company have surged a whopping 83.8% in the past three months compared with the industry’s 33.4% growth.
Let’s Delve Deeper
Foot Locker is trying to improve its performance through operational and financial initiatives. In this regard, management is accelerating efforts, including greater diversification of merchandise and vendor mix, acceleration of the shift to off-mall and rollout of the important growth banners, and advancement of omnichannel endeavors.
We note that Nike has been the company’s largest brand partner and management looks forward to revitalizing its Nike relationship. This alliance focuses on developing a plan complementary to Nike’s direct-to-consumer strategy. Additionally, it is focused on expanding its footprint at WSS, the company’s off-mall banner. International expansion is another catalyst.
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Foot Locker’s digital business has been performing well for a while now. The company has been investing significantly to reinforce its digital presence and augment its direct-to-consumer operations. The company has activated a Shop Your Store feature on its website. Moreover, it has added Apple Pay and Google Pay to its digital payment options to provide greater flexibility and convenience to customers. During third quarter fiscal 2023, the company’s digital sales penetration rate was 17%, up 150 basis points year over year, excluding East Bay, which closed last year.
Concerning cost-saving efforts, management had unveiled a $200 million cost-saving program opportunity. It expects to capture roughly 40% of the overall $350 million targeted savings this year. The company’s cost optimization program generated total savings of about $30 million in the third quarter of fiscal 2023.
Additionally, the company is progressing well with the membership program FLX, which inspires customers to remain within the Foot Locker portfolio of banners. The FLX program continues to exhibit momentum and helps the company efficiently serve customers. Management remains encouraged to continue refining FLX globally. This program will offer exclusive products and service access for members, with the benefits being made available to members only. It will expand FLX to the international markets to achieve a full-scale impact in Europe and Asia Pacific.
Given the aforesaid strengths, the stock will continue performing well in the future. A VGM Score of B further adds to the upside. As a result, analysts seem optimistic about the stock. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is currently pegged at $8.1 billion and $2.07, respectively. These estimates show an increase of 0.6% and 57.1%, respectively, year over year.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch ANF, Gap GPS and American Eagle Outfitters AEO.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 13.3% from the year-ago reported figure. ANF delivered an earnings surprise of 713% in the last reported quarter.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year EPS suggests growth of 387.5%, from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently has a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23% in each of the trailing four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 4% and 39.2%, respectively, from the year-ago reported figures.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
The Gap, Inc. (GPS) : Free Stock Analysis Report
Foot Locker, Inc. (FL) : Free Stock Analysis Report
