Foot Locker Should Benefit From Favorable Industry Tailwinds

Wedbush’s Christopher Svezia believes a 13 percent premium multiple is justified for Foot Locker, Inc. (NYSE: FL), given the company’s “global dominance in athletic footwear and the ability to navigate and adapt to consumer preferences.”

Svezia initiated coverage of the company with an Outperform rating and price target of $80.

Consistent, Sustainable Growth

The analyst mentioned management has continued to demonstrate discipline in investing capital in the business and in returning cash to shareholders.

“This has allowed FL to generate consistent, industry-leading comp and earnings growth, which we believe will carry into FY17.” Svezia stated.

In an article published on October 31 by The Street, intensifying competition among companies is expected to lead to price wars, which would in turn “entice” shoppers to spend more at Foot Locker.

Tailwinds

The analyst believes Foot Locker should be able to sustain positive mid-single-digit comp, with double-digit EPS growth well into FY17, driven by e-commerce growth, store remodels, international expansion and leveraging the company’s best in class inventory management.

“Recent strength in retro and classic in addition to fashion running footwear styles should continue to set a positive backdrop for FL globally,” Svezia went on to say.

In fact, with the shares rising, Jim Cramer believes that this is a good time to invest in the stock.

At last check, Foot Locker was up 1.94 percent at $76.09.

Image Credit: By Raysonho @ Open Grid Scheduler / Grid Engine (Own work) [CC0], via Wikimedia Commons