Foot Locker
is working through some changes that could negatively impact the stock, one analyst team argued as it downgraded shares of the footwear retailer.
Goldman Sachs analysts led by Kate McShane lowered their recommendation on
Foot Locker
(ticker: FL) to Sell from Neutral and established a price target of $18 in a report Thursday.
Shares were trading flat at $21.95 on Thursday.
Multiple factors prompted the downgrade at Goldman.
First, the Champs Sports brand is getting a revamp, which means closing underperforming stores and focusing on key markets. “While undergoing this transformation, however, there is a possibility that FL loses some of its existing customers as it shifts focus and decreases its store footprint,” the analysts wrote.
Second, the store is landing less desirable products from
Nike
(NKE), which could drag on market share. Here’s what happened: In February 2022,
Foot Locker
said
Nike
was focusing on its direct-to-consumer strategy, adding that it “expected its concentration to decline meaningfully” into this year, the analysts wrote. Nike items remain on the shelves, they continued, but they’re not “the most in-demand products,” while other retailers including
Dick’s Sporting Goods
(DKS) continue to be “key partners.”
And lastly, the stock’s valuation could be pressured as the company is still grappling with weak demand and high promotions “as it works through still-heavy inventory levels,” Goldman noted.
It’s been a tough year for the footwear retailer, with shares down 42%. In August, the company missed quarterly sales estimates and posted earnings in line with expectations. A majority of analysts are on the sidelines, with 68% rating the stock at Neutral, 18% at Buy and 14% at Sell, according to FactSet.
Write to Emily Dattilo at [email protected]
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