Foot Locker To Gain From Strengthened Partnership With Nike: Analyst Forecasts Earnings Recovery Next Year

Core Viewpoint - Needham analyst Tom Nikic initiated coverage on Foot Locker, Inc. with a Buy rating and a price forecast of $27, indicating a positive outlook for earnings recovery in 2025 driven by various factors [1] Group 1: Earnings Recovery and Growth Drivers - Foot Locker is expected to benefit from a strengthened partnership with Nike, growth in non-Nike brands, recent SG&A investments, and recovery of merchandise margins [1][4] - The analyst anticipates trends to improve post-Thanksgiving, supported by a consumer survey showing strong holiday interest in sneakers [2] - Foot Locker is also expanding its offerings with brands like Hoka and On, and strengthening relationships with Adidas, New Balance, Crocs, and UGG [3] Group 2: Financial Projections - The company is projected to report FY24 revenues of $8.164 billion and earnings per share of $1.61 [5] - Foot Locker's EBIT margin was significantly lower last year compared to pre-COVID levels, with modest improvement expected in FY24 due to long-term growth investments [3][4] Group 3: Market Dynamics - Foot Locker faced challenges from Nike's decision to reduce high-demand product supply, but a shift to increase product allocations to Foot Locker starting in Q4 2024 is expected to drive positive sales growth [2] - Merchandise margins are still over 300 basis points below pre-COVID levels, indicating further opportunities for gross margin improvement [4]