2023-03-20 13:57:09 ET
Foot Locker ( NYSE: FL ) stock fell sharply, giving up a double-digit gain at the intraday high, as analysts lacked enthusiasm for an earnings beat.
Shares initially jumped sharply on Monday after the footwear and apparel retailer reported a strong beat on top and bottom lines for the fourth quarter. Additionally, Nike ( NKE ) sales are also projected to be a smaller percentage of sales incoming years, down to a range of about 55% to 60% from a current 70% by 2026, reducing some concentration risk. Over that period, management expects total sales growth of 5% to 6% per annum with comparable sales growth of 3% to 4% alongside adjusted EPS growth in the “low- to mid-twenties.”
Shares rose to an intraday high of $47, just short of the 52-week high of $47.22. Yet, that pop was short lived as analysts questioned the long-term targets, especially as guidance for the year ahead came in well below expectations .
Citi analyst Paul Lejuez told clients that the sales guidance might prove overly aggressive. As such, actual revenue growth may come to disappoint, elevating downside risk. He reiterated a Neutral rating on the stock.
Likewise, UBS analyst Jay Sole reiterated a Neutral rating on the stock, advising that 2023 guidance tempers optimism on the big earnings beat. Further, the aggressive long-term guidance remains a show-me story.
“While this plan could make the stock look inexpensive to some, we believe the market will not price this growth outlook in until it sees evidence of it playing out given macro uncertainty,” Sole said.
Foot Locker ( FL ) stock erased strong gains in early trading to trend toward a nearly 6% drop in afternoon trading. Shares wavered in a wide range between $39.68 and $47 on Monday.
Details emerging during an investor day presentation indicated the retailer will close approximately 400 stores by 2026, with a particular concentration on closing underperforming mall locations for both Foot Locker and Champs Sports. Additionally, while the company will continue to focus on basketball sneakers and apparel, diversification into running and outdoor shoes. Deckers Outdoors ( DECK ) brand Hoka, New Balance, and On Holding ( ONON ) are expected to be among brands aiding a diversification away from Nike ( NKE ).
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Foot Locker falls as analysts pan aggressive earnings guidance