Foot Locker (FL) Stock Forecast & Price Target

Foot Locker Inc. has shown significant improvement in its merchandise margins, achieving a 300 basis point increase year-over-year, which has bolstered its gross margin amidst a reduction in promotional activities. The company has also reported strong performance in refreshed store locations, with lift percentages ranging from low single-digit to mid-single-digit increases in their first year, contributing to an expansion of operating margins by 298 basis points to 5.2%. Anticipated revenue growth for FY26 is projected at mid-single-digit levels, fueled by a resurgence of the Nike brand and strong sales across a diverse range of other brands, reflecting robust demand and operational momentum.

Foot Locker is experiencing a significant decline in total sales, exacerbated by foreign exchange pressures and ongoing store closures, leading to revised operating margin guidance of 2.6%-3.1%. The company's reliance on Nike, which constitutes a majority of its sales, poses additional risks as modest revenue declines are anticipated for FY26, particularly with growth in non-Nike brands suggesting a downturn in Nike sales. Furthermore, expectations for FY25 are tempered by potential challenges from a tough macroeconomic environment that could drive sales and earnings per share below current guidance, emphasizing the negative trajectory compared to the stronger profitability levels observed in 2018-2019.