4. Foot Locker, Inc. (NYSE:FL)
No. of Hedge Fund Holders: 21
Performance of FL Over the Past 6 Months: +13.7%
Foot Locker, Inc. (NYSE:FL) operates thousands of retail stores across the US, Canada, Europe, Australia, and New Zealand. The company sells athletically inspired shoes and apparel. The company uses omni-channel capabilities to bridge the digital world and physical stores.
On 23rd May, analysts at Morgan Stanley raised their price target on Foot Locker, Inc. (NYSE:FL) from $23.00 to $24.00. They gave an “Underweight” rating on the stock.
Foot Locker, Inc. (NYSE:FL) will find it difficult to develop a shield that protects it from its competitors. The focus of the company is on selling more through its e-commerce sites, and there has been a decline in its store count lately.
At the end of the first quarter of 2022, 21 hedge funds tracked by Insider Monkey reported owning stakes worth $177.09 million, down from 27 in the preceding quarter worth $222.4 million.
Miller Value Partners, an investment management firm, published its investor letter for Q1 2022 and mentioned about Foot Locker, Inc. (NYSE:FL). Here is what the fund said:
“Finally, Foot Locker (NYSE:FL) came under significant pressure during the quarter, with the stock down more than 50% from its highs and valuation not far from early 2020 lows. Nike continues to place a greater focus on their Direct-to-Consumer business, which will decrease their contribution to Foot Locker’s total sales, retreating to historical averages of 50% by 2023. While a near-term headwind to sales, management plans to offset the lost business by expanding distribution to other leading brands, rolling out larger neighborhood free-standing stores, and expanding two new growth banners (WSS & Atmos). WSS stores will provide an off-mall presence and focus on the rapidly growing and underserved Hispanic market. Atmos will provide Foot Locker with the ability to expand into Japan and Asia sneaker market with their digitally led business model. These new growth concepts have a combined potential to add more than $1B in sales by 2024. The company’s balance sheet remains very strong with $800M in cash and management is increasing returns to shareholders through raising the dividend by 40% and announcing a $1.2B share buyback (more than 40% of the float at current share prices). With the next 12 to 18 months as a transition period for the company, the share price weakness provides attractive reward/risk investment potential, near 3x Enterprise Value/Earnings Before Income, Taxes, Depreciation, and Amortization (EV/EBITDA) and close to a 30% normalized free cash flow yield.”
