Foot Locker Inc (NYSE:FL) shares have been volatile in today’s trade after Goldman Sachs analyst Kate McShane downgraded the stock to Sell from Neutral with a maintained price target of $18.
The analyst is bearish on the stock as the repositioning of the Champs Sports brand is expected to continue to weigh on the comparables and believes FL’s market share position will be difficult to stabilize following the allocation changes by Nike Inc (NYSE:NKE).
Also, the analyst notes deterioration in investor sentiment related to several retail companies on concerns related to the overall health of the consumer as student loan payments resume and gas prices shoot up.
Notably, in Feb 2022, FL announced that Nike was accelerating its DTC strategy and expected its concentration to decline meaningfully in Q4 FY22 to a level that would continue into 2023.
McShane notes that the company is closing underperforming stores and focusing on existing non-primary markets, prioritizing key geographic markets where Champs has historically been strong.
The analyst said that the transformational initiative could result in existing customer loss as the company shifts focus and curtails its store footprint.
McShane estimates FY23 EPS of $1.32, vs. consensus of $1.33, and FY24 EPS of $1.91, 9% below consensus of $2.09.
Also Read: Foot Locker’s Inventory Woes and Uncertain Path: Analyst Calls It Fairly Valued
Price Action: FL shares are up 0.46% at $22.04 on the last check Thursday.
