On Thursday, Williams Trading changed its stance on Foot Locker (NYSE:FL), moving from a Sell rating to a Hold. The firm adjusted its price target for the retailer's shares to $20.00 from $21.00, as the stock trades near $22.11 after falling 13% in the past week.
According to InvestingPro data, eight analysts have recently revised their earnings estimates downward. This adjustment follows Foot Locker's third-quarter performance, which did not meet expectations, and a reduction in the company's full-year guidance.
Foot Locker's optimism, as expressed during the second-quarter earnings call, was based on the anticipation of improved product allocations from Nike (NYSE:NKE), which carries a Buy rating and a $97.00 price target from Williams Trading. The company had expected these allocations to boost sales growth in the second half of the year.
Despite this, the actual sales trends did not accelerate as predicted, with revenue growth nearly flat at 0.04% over the last twelve months. InvestingPro's comprehensive analysis reveals the company maintains strong liquidity with a current ratio of 1.67, though its overall financial health score remains weak.
The retailer experienced a high single-digit comparable store sales (SSS) increase in September, driven by strong sales during the back-to-school season. However, once this period concluded, comparable sales turned negative for the remainder of the quarter. The third-quarter SSS growth of 2.4% fell short of the consensus expectation of a 3.2% increase, leading to disappointment among Foot Locker's management team.
This performance marked a deceleration from the second quarter, despite efforts to improve the situation with enhanced merchandise assortments, an updated loyalty program, and significant updates to the store base. Analyst targets now range from $17 to $34, reflecting mixed sentiment about the company's recovery potential.
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