While retailers across the sector are struggling with declines in consumer spending, analysts are bearish on
Foot Locker
and
Nike
for different reasons.
Citi
‘s Paul Lejuez downgraded Foot Locker’s (ticker: FL) stock to Hold from Buy on Monday, and Williams Trading analyst Sam Poser lowered his rating to Sell on Sunday after sticking to his Hold call since August last year.
Shares of Foot Locker fell nearly 5% to $28.74 on Monday.
Foot Locker’s stock, down more than 20% this year, suffered a blow on its earnings day Friday. Newly appointed CEO Mary Dillon said the company is taking more aggressive markdowns on inventory as sales have slumped due to weaker lower-income consumer spending. Management now forecasts sales to decline 6.5% to 8% in the fiscal year ending January 2024 versus the more modest 3.5% to 5.5% fall expected by management earlier—or the 4.6% decline predicted by analysts.
Lejuez believes investors have lost confidence in management after being drawn earlier to Foot Locker’s new long-term growth strategy, driven by Dillon’s appointment in September.
Even with a high exposure to lower-income consumers, “they were not conservative at all about near-term trends” wrote Lejuez, who lowered his price target to $30 from $48.
Management on Friday also reiterated its “Lace Up” plan, which includes a revenue target of about $9.5 billion by 2026. Poser sees the plan as “untied or knotted up” and lowered his target to $25 from $38.
Foot Locker didn’t immediately respond to a request for comment.
For Nike (NKE), Poser also took a strong bearish call, downgrading the stock to Sell from Hold and lowering the target to $95 from $120.
He believes there is a lack of new compelling products to help move Nike’s inventory levels in the U.S. Inventory growth was up 16% at the end of the third quarter versus the year earlier, a level that is “roughly $800 million above the optimum,” Poser wrote.
Nike didn’t immediately respond to a request for comment, although CEO John Donahoe said in December that the “inventory peak is behind us.”
Nike stock was down 3% Monday, to $111.79.
Write to Karishma Vanjani at [email protected].
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