BTIG downgraded Foot Locker to Neutral from Buy on Tuesday with an unchanged price target of $27 per share. The shares had rebounded over 30 percent against the August lows after the athletic specialty retailer’s tough Q2 report.
Analysts appear to believe that the rebound is unwarranted as macro and competitive headwinds set the stage for a gradual return to the upside.
“Shares have rebounded over 30 percent off the August lows post the Q2 report, despite our expectation that the upcoming Q3 report (11/29, BMO) will point to unchanged fundamentals, with potential risk to near-term and 2024E EPS,” the analysts explained.
BTIG is taking the opportunity to step to the sidelines despite continuing to believe in the “significant low-hanging fruit at FL and the company’s potential as CEO Mary Dillon implements her playbook.”
“We believe the turn is likely to be more gradual than anticipated given 1) ongoing macro headwinds (including the resumption of student debt payments); 2) the reduction in Nike (NYSE:NKE, Not Rated) allocations, which will take some time to be fully offset by growth in other brands; 3) growing competition from other retailers (as well as those brands’ own DTC businesses),” the analysts wrote.
FL shares are down more than 2 percent in morning trading on Tuesday.
Photo courtesy FL
