Core Viewpoint - Foot Locker Inc is experiencing a significant surge in stock price following the announcement of a $2.4 billion acquisition by Dick's Sporting Goods, indicating a strong market reaction and potential upside for investors [1]. Group 1: Acquisition Details - Dick's Sporting Goods will acquire Foot Locker for $2.4 billion, translating to $24 per share, which represents an 86% upside from Foot Locker's current trading price [1]. - Following the acquisition news, Dick's Sporting Goods shares have decreased by 14% [1]. Group 2: Stock Performance - Foot Locker's stock has been trading at nearly 15-year lows, with a nine-month deficit of 28% prior to the recent surge [2]. - The stock's 20-day moving average has recently provided support, contributing to the increase in share price [2]. - The recent surge in Foot Locker's stock price marks one of its best single-day percentage increases ever [2]. Group 3: Short Interest - Short interest in Foot Locker has risen by 7.8% over the past two reporting periods, now accounting for over 16% of the stock's total available float [3]. - At the current average daily trading pace, it would take approximately three days for short sellers to cover their positions [3].

Core Viewpoint - Dick's Sporting Goods plans to acquire Foot Locker for $2.4 billion to expand its international presence and strengthen its position in the Nike sneaker market [1][6]. Company Overview - Dick's will use a combination of cash and new debt for the acquisition, offering Foot Locker shareholders either $24 in cash (a 66% premium) or 0.1168 shares of Dick's stock [1][2]. - Foot Locker has been undergoing a turnaround under CEO Mary Dillon, but market conditions have negatively impacted its stock, which is down 41% this year [2][3]. Financial Performance - In the most recent fiscal year, Dick's reported $13.44 billion in revenue, while Foot Locker reported $7.99 billion [3]. - Foot Locker anticipates a net loss of $363 million for the fiscal first quarter, compared to a net income of $8 million in the previous year [12]. - Dick's reported a comparable sales growth of 4.5% and earnings per share of $3.24 [13]. Strategic Implications - The acquisition will allow Dick's to operate Foot Locker as a standalone business unit while maintaining its brands [4]. - The merger is expected to create a new global platform and enhance the omnichannel experience for customers [5]. - The combined company will have a significant competitive edge in the wholesale sneaker market, particularly for Nike products [5][6]. Market Positioning - Foot Locker operates 2,400 retail stores in 20 countries, providing Dick's access to a younger, urban consumer base that is critical for long-term growth [7]. - The acquisition raises anti-competition concerns, but Wall Street anticipates a favorable stance from the Federal Trade Commission [8]. Analyst Perspectives - TD Cowen has downgraded Dick's shares, calling the deal a "strategic mistake" and expressing concerns about low returns and integration risks [10][11]. - There is skepticism regarding the potential for M&A to create shareholder value in the Softlines Retail sector [11].

Group 1 - Dick's Sporting Goods is in advanced talks to acquire Foot Locker for $24 per share, with a potential announcement as early as Thursday [1] - Foot Locker's stock has dropped 41% this year due to fluctuating tariff policies, closing at $12.87 with a market cap of $1.22 billion before the acquisition news [1] - The acquisition would value Foot Locker at approximately $2.3 billion, with the stock surging over 60% in after-hours trading following the news [1] Group 2 - Foot Locker has been struggling, with a 8.4% decline in stock this year and a continuous revenue drop for three consecutive years, falling below $8 billion [2] - Under CEO Mary Dillon, Foot Locker aims to revamp its store network and enhance its membership rewards program, but faces challenges in restoring relationships with Nike [2] - GlobalData's Neil Saunders notes that if the acquisition succeeds, Dick's Sporting Goods would take over a company that is still in a disadvantaged position, with Foot Locker's recovery not fully underway [2]

Group 1 - Foot Locker's stock surged by 68.6% in after-hours trading following reports of a potential acquisition by Dick's Sporting Goods Inc. [1] - The estimated size of the acquisition deal is approximately $2.3 billion [1]. Group 2 - Foot Locker's closing price before the news was $12.87, with an after-hours price of $21.70 [2]. - The market capitalization of Foot Locker is reported to be $1.226 billion [2]. - The stock reached a 52-week high of $33.94 and a low of $11.00 [2].

Core Viewpoint - Foot Locker Inc's stock experienced a significant surge due to a surprise tariff deal between the U.S. and China, but it still faces substantial year-over-year and year-to-date declines [1] Group 1: Stock Performance - Foot Locker's stock rose 10.6% on Monday and is currently trading at $13.39, marking an 8.7% increase in May [1] - Despite the recent gains, the stock has a 41.3% deficit year-over-year and is down 38.7% year-to-date [1] Group 2: Technical Analysis - The stock is approaching a historically bearish trendline, specifically its 50-day moving average, which has been a critical level in the past [2] - In the last three years, similar approaches to this trendline have resulted in a decline 77% of the time, averaging a 6.5% drop one month later [2] - A comparable decline from the current price could bring shares below $12.50, close to their 15-year low of $11 reached on April 16 [2] Group 3: Options Market Sentiment - The 10-day put/call volume ratio for Foot Locker is at 14.77, ranking in the 96th percentile of annual readings, indicating unusually bullish sentiment among short-term options traders [3] - This lopsided optimism in the options market could create headwinds for the stock in the event of a pullback [3]

Core Insights - Foot Locker, Inc. is positioned for growth through its Lace Up Plan, effective cost management, and investments in stores and digital capabilities [1][2][4] - The company has shown consistent comparable sales growth, improved gross margins, and strong free cash flow, indicating operational resilience [1][2] Sales Performance - In Q4 of fiscal 2024, comparable sales increased by 2.6% year-over-year, with Foot Locker and Kids Foot Locker brands leading the growth [3] - The company forecasts fiscal 2025 comparable sales growth of 1-2.5%, marking its fourth consecutive year of positive comps [3] Cost Management - Cost-reduction initiatives resulted in $35 million in savings during Q4, exceeding the target of $350 million for fiscal 2024 with $100 million achieved [4] - The gross margin improved by 300 basis points to 29.6% in Q4, driven by a recovery in merchandise margins [5] Future Projections - For fiscal 2025, Foot Locker anticipates gross margin expansion of 40-80 basis points, targeting a range of 29.3-29.7% [6] - Adjusted EPS is expected to be between $1.35 and $1.65, indicating a 10% increase at the midpoint from fiscal 2024 [7] Store and Digital Expansion - The company refreshed over 400 store locations in fiscal 2024 and plans to update an additional 300 stores in 2025, with new "Reimagined" stores projected to generate $4-$5 million in annual sales each [10] - Digital sales penetration grew by 230 basis points year-over-year to 21.8% of total sales, with a goal of reaching 25% by fiscal 2026 [11] Customer Engagement - The relaunch of the FLX Rewards Program significantly boosted customer retention, accounting for 49% of North American sales in Q4, up nearly 30 percentage points from the previous year [12] Valuation and Market Position - Foot Locker's stock is trading at a low price-to-sales multiple of 0.13, below the industry average of 1.30, indicating it may be undervalued [13] - The company faces challenges in international markets, with a 7.6% drop in sales in the Asia-Pacific region in Q4, impacted by inflation and competition [14]

Company Overview - Foot Locker (FL) shares increased by 19% to close at $13.64, following a significant trading volume compared to normal sessions, despite a 29.4% loss over the past four weeks [1] - The company is making progress with its Lace Up Plan, focusing on digital acceleration, store optimization, and brand diversification to enhance comparable sales growth and improve margins [2] Earnings Expectations - Foot Locker is expected to report quarterly earnings of $0.01 per share, reflecting a year-over-year decline of 95.5%, with revenues projected at $1.85 billion, down 1.6% from the previous year [3] - The consensus EPS estimate for Foot Locker has been revised down by 90.2% over the last 30 days, indicating a negative trend in earnings estimate revisions, which typically does not lead to price appreciation [4] Industry Context - Foot Locker is part of the Zacks Retail - Apparel and Shoes industry, where Boot Barn (BOOT) also operates, having closed 12.8% higher at $103.69, but with a -9.5% return over the past month [4] - Boot Barn's consensus EPS estimate remains unchanged at $1.24, representing a year-over-year increase of 22.8% [5]

Core Insights - Brands relying on the Asia-Pacific region for apparel production are seeking ways to mitigate the impact of President Trump's reciprocal tariff plan [1] - The average pre-mitigation headwinds to gross margin and EPS are 670 basis points and 65%, respectively [1] - Companies like Under Armour, VF Corp, and Nike are particularly vulnerable due to their low margin structures [2] Company-Specific Analysis - Under Armour, VF Corp, and Nike have little "cushion" to absorb incremental tariffs, which will significantly impact their EPS [2] - Ralph Lauren and Foot Locker are the least impacted brands, with a predicted 20-25% pre-mitigation headwind to EPS due to their strong international presence and high-margin P&L [2] - Ralph Lauren has a strong track record of raising prices for eight consecutive years, indicating confidence in managing pricing if necessary [3] - Foot Locker has minimal direct exposure to tariffs as they import sneakers, although they face indirect risks from suppliers [3] Manufacturing Insights - The analyst does not expect a shift towards in-sourcing manufacturing to the U.S. due to challenges in building capacity and finding skilled labor [4]

Core Viewpoint - Foot Locker, Inc. is currently undervalued with a low price-to-sales (P/S) multiple of 0.17, significantly below the industry average of 1.39 and sector average of 1.47, presenting an attractive investment opportunity [1][3] Financial Performance - In the fourth quarter of fiscal 2024, comparable sales increased by 2.6% year over year, with gross margin improving by 300 basis points to 29.6% despite a promotional environment [6] - The company achieved $35 million in cost savings in the fiscal fourth quarter and $100 million in total savings for fiscal 2024, exceeding its target [7] - For fiscal 2025, Foot Locker anticipates gross margin expansion of 40-80 basis points, reaching 29.3-29.7%, supported by stronger full-price selling and ongoing savings [8] Strategic Initiatives - Foot Locker's Lace Up Plan is driving sales growth, margin expansion, and digital acceleration, with multiple quarters of positive comparable sales growth [5] - The company plans to refresh over 400 stores in fiscal 2024 and an additional 300 in 2025, with the "Reimagined" store concept expected to generate annual sales of $4-$5 million per location [9] - Digital transformation efforts have led to a 12.4% increase in global digital comparable sales in the fiscal fourth quarter, with digital sales penetration reaching 21.8% of total sales [10] Customer Engagement - The relaunch of the FLX Rewards Program has significantly boosted customer retention, reaching 49% of North American sales in the fiscal fourth quarter, with membership growing by 3.2 million [11][12] Future Outlook - Foot Locker expects fiscal 2025 comparable sales growth of 1-2.5% and adjusted EPS projected at $1.35-$1.65, reflecting a 10% growth at the midpoint compared to fiscal 2024 [13] - The company is prioritizing high-return investments to ensure long-term growth despite challenges in international markets and underperforming apparel sales [8][14]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 1, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-10299 (Exact name of registrant as specified in its charter) | New York | 13-3513936 | | --- | --- | | (State or other ju ...