Citi upgrades Foot Locker to Neutral over wholesale emphasis
Foot Locker (FL) shares are trading higher on Friday after receiving an upgrade from Citi analysts. The firm has raised its rating on the company from Sell to Neutral, stating that the retailer's shift in focus from digital channels to wholesale channels could benefit the stock.
In addition to the rating upgrade, Citi has also increased its price target on Foot Locker from $19 to $24 per share.
Yahoo Finance's Jared Blikre and Seana Smith break down the details.
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Editor's note: This article was written by Angel Smith
Video Transcript
JARED BLIKRE: Foot Locker shares rising this morning following an upgrade from Citi. The firm lifting its rating to neutral from sell, citing that the retailer could see benefit in pivoting its focus back to its wholesale channels after growing too focused on its digital business. And Seana, I think the picture is worth a thousand words. Let's go to the YFi Interactive where I have our apparel heat map up and a lot of dark red. Look at that. Lulu down 17%. Nike down 8%. Foot Locker though up 5%.
So bucking the norm here. We're bucking the existing trends that we're seeing today. And I think the key line there is that, yeah, Foot Locker-- excuse me, Nike went a little bit too far emphasizing digital over wholesale and now they've got to dial it back up. And I get it, Foot Locker is the beneficiary. But this is a stock that has really just traded sideways over the last year-- over the last two years basically.
SEANA SMITH: Yeah, certainly. I mean, there's only almost one way to go for Foot Locker at this one given the amount of pressure that it has been under. So Citi at least saying that right now valuations look a bit more compelling than they did following this massive slide that we have seen in the stock. And even like take a look at that year to date chart with shares off just about 20%, three months off about 19%. So I guess three months is essentially since the start of the year at this point.
But when it comes to what is it going to take to turn Foot Locker's business around Citi making the argument that the shift here from Nike is going to help just a bit. But I think what that long-term goal is going to be and exactly how Foot Locker remains competitive with in a landscape, that has become increasingly competitive with its rivals. They have struggled really to carve out their niche to execute on those turnaround plans. So I think many investors still, though, remain skeptical about what exactly that road ahead looks like from here.
