Foot Locker, Inc. (NYSE: $FL) is a leading global retailer of athletic footwear and apparel that has over 2500 stores globally. Since 1975, the brand has been an iconic part of the footwear scene, street culture, and sneaker scene.
On Wednesday morning, March 6, 2024, Foot Locker released its Q4 fiscal 2023 results to a disappointing market reception after it announced delays in its long-term financial guidance and weak fiscal 2024 outlook.
Foot Locker Q4 Results
In the fourth quarter, Foot Locker recorded an adjusted EPS of $0.38, beating estimates of $0.32 but below the $0.97 per share reported the previous year. Revenue came in at $2.38 billion, beating estimates of $2.28 billion and a 1.5% Y/Y increase on an FX-neutral basis. Meanwhile, comparable store sales fell 0.7%.
In the quarter ending February 3, 2024, Foot Locker swung to a loss of $389 million or a $4.13 dilute loss per share, worse than the net income of $19 million or $0.20 per share the previous year.
The fourth quarter gross margin fell 350 basis points compared to the previous year, driven by higher markdowns, while the SG&A as a percentage of sales was up 10 basis points compared to last year, driven by a cost optimization program.
Balance Sheet
Foot Locker ended the quarter with $297 million in cash and cash equivalents with a debt of $447 million. Its merchandise inventories stood at $1.51 billion, an 8.2% decline compared to last year, while they declined 7.8% Y/Y on an FX-neutral basis.
Store Openings
In Q4, Foot Locker opened 29 new retail stores, remodeled/relocated 66 stores, and closed 113 stores. As of the end of February 3, 2024, the company had 2,523 stores in 26 stores across N. America, Asia, Europe, New Zealand, and Australia. Additionally, it has 202 licensed stores across Asia and the Middle East.
Foot Locker Issues Weak Guidance
Most of the attention was on Foot Locker’s weak guidance that missed estimates. The company forecasts an adjusted EPS of $1.50-$1.70, which is below estimates of $1.40-$2.30 at the midpoint. Additionally, Foot Locker expects sales to remain stagnant in fiscal 2024, rising 1% or dropping 1%, compared to analysts’ forecasts of a 0.5% decline.
Foot Locker to Miss Lace-Up Target
Another disappointing aspect of the Q4 report was Foot Locker’s revelation that it expected a delay in its long-term financial targets set last year.
The company revealed its Lace-Up plan in March 2023, with a plan to grow revenue over $9.5 billion by 2026. According to the revised vision, the company now expects to meet its target by 2028.
During an FN interview, Foot Locker President and CEO Mary Dillon stated, “We believe that it will take us a little bit longer, but we’re going to invest in the strategies that are working for us. [Those] will continue to drive our top line and long-term profitable growth.”
Foot Locker (FL) Stock Performance
Following the downbeat outlook, FL stock fell 29.35% at the close of trading on Wednesday, March 6, 2024, at $24.24 per share. The Wednesday plunge means that Foot Locker has lost over 50% of its value since May 2021.
Year-to-date, the stock is down 21.48%, and in the past 12 months, it is down 43.94%. The stock is now relatively cheap, with a forward P/E ratio of 13.24, an Enterprise Value/Revenue ratio of 0.62, and a trailing 12-month Price/Sales ratio of 0.28.
It is currently valued below its 50-day moving average of $30.31, 200-day moving average of $25.29, and is trading at a 48.43% discount on its 52-week high of $47.
Foot Locker Stock Forecast
13 Wall Street analysts give FL stock an overall hold rating. They forecast an average price of $26.64 in the next 12 months, with the most bullish predicting $38 while the most bearish expect $17 per share. The analysts’ average price target is a 9.90% upside based on the last closing price.
Should You Add FL Stock To Your Portfolio?
The main reason for Foot Locker’s recent plunge was its weak fiscal 2024 guidance and delays in its long-term financial plan issued in March 2023. In a market that is averse to sudden changes, it is no surprise that FL stock lost nearly 30% of its value on Wednesday.
However, its current cheap valuation and its upbeat revised long-term outlook make it a lucrative stock for long-term investors. According to CFO Mike Baughn, they are confident that their “strategy will unlock longer-term shareholder value, including a return to quarterly dividends and share repurchases over time.”
Consequently, while the near-term outlook for FL stock is not promising, its long-term outlook looks promising for investors who are willing to take the plunge now.
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