Foot Locker, Inc. FL has demonstrated strong upward momentum, trading above its 200-day and 100-day simple moving averages (SMA). SMA is a key indicator of price stability and long-term bullish trends. As of Monday, FL was trading at $27.33, which surpassed both its 200-day and 100-day SMA of $26.99 and $26.32, respectively, highlighting a continued uptrend.

SMA, a key tool in technical analysis, is used to assess price trends by smoothing out short-term fluctuations, offering a clearer view of the stock's longer-term direction. This technical strength, along with sustained momentum, reflects positive market sentiment and investor confidence in FL's financial health and growth prospects.

Shares of the company have experienced a decent increase over the past year. The stock has gained 56.7% compared with the Zacks Retail - Apparel and Shoes industry’s 29.8% growth. The company’s ability to adapt and innovate in challenging market conditions has enabled it to outperform the broader Zacks Retail-Wholesale sector and the S&P 500 index’s growth of 30.3% and 31.2%, respectively, during the same period. FL is currently trading 23.2% below its 52-week high of $35.60 attained on Feb. 23, 2024.

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From a valuation perspective, Foot Locker's shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-sales ratio of 0.31, which is below the five-year median of 0.43 and the industry’s average of 1.09, the stock offers compelling value for investors seeking exposure to the sector. Furthermore, it currently has a Value Score of A, thus further validating its appeal.

FL Gains on International Expansion & Customer Engagement

Foot Locker is making significant strides in international expansion, focusing on high-growth regions. The company plans to enter the Indian market in late 2024, leveraging partnerships with Metro Brands and Nykaa Fashion to tap into the rising demand for sneakers and premium footwear.

In addition, Foot Locker has signed agreements to transfer operations in Greece and Romania to the Fourlis Group, a prominent retail operator in Southeast Europe. This collaboration is expected to result in more than 100 new store openings across the region over time, allowing Foot Locker to grow its international presence with minimal capital investment while reducing operational complexity.

Foot Locker's store reimagining initiative is reshaping the customer experience. In the second quarter of fiscal 2024, the company opened five new concept stores, remodeled or relocated 14 and modernized 67 stores. These new designs have boosted conversion rates, basket sizes and women’s footwear sales. The reopening of the flagship 34th Street store in New York, designed in collaboration with Nike and Jordan brands, exemplifies this strategy.

Foot Locker achieved a 2.6% rise in comparable sales in the fiscal second quarter. Strong performances in its global and Kids Foot Locker brands, which saw a 5.2% increase year over year in the fiscal second quarter, played a key role in this growth. This boost was particularly notable during the back-to-school season in July and August. Also, the company’s Lace Up Plan further enhanced operations and customer experience, with projected comparable sales growth of 2.1% for fiscal 2024.

The company’s FLX loyalty program, relaunched in June 2024, is driving customer engagement and sales. Loyalty members accounted for 24% of sales in the second quarter, up 200 basis points from the previous year. The program’s enhanced features, including point redemptions for cash discounts, have led to higher average order values and increased units per transaction. Foot Locker aims to grow loyalty penetration to 50% by 2026. The loyalty program is expected to play a crucial role in building repeat business and customer loyalty.

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Foot Locker’s Key Banners Continue to Struggle

Despite overall positive comparable sales growth, some key banners continue to struggle. Champs Sports saw a 3.9% decline in comparable sales in the fiscal second quarter, thereby indicating challenges with repositioning. WSS also posted a 6.2% drop, impacted by inflation and reduced discretionary spending, especially in California. These declines highlight ongoing challenges in stabilizing Foot Locker’s broader portfolio.

How to Play FL Stock?

Nonetheless, investors may find Foot Locker stock attractive due to its strong upward momentum, with shares trading above key moving averages, indicating price stability and bullish trends. The company has shown resilience in a challenging market and is focusing on international expansion, including entry into the Indian market and operations in Greece and Romania. Strategic initiatives like the relaunch of the FLX loyalty program have enhanced customer engagement and boosted sales. Despite challenges in key banners like Champs Sports and WSS, Foot Locker’s attractive valuation and solid Value Score make it a noteworthy option for investors. It currently carries a Zacks Rank #3 (Hold).

Key Picks

Better-ranked stocks are Nordstrom Inc. JWN, Abercrombie & Fitch Co. ANF and Crocs, Inc. CROX.

Nordstrom is a leading fashion specialty retailer in the United States. The company offers an extensive selection of both branded and private-label merchandise. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Nordstrom’s fiscal 2024 sales indicates growth of 0.6% from the fiscal 2023  figure. JWN has a negative trailing four-quarter average earnings surprise of 17.8%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter. 

The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 13.1%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.

Crocs offers a wide variety of footwear products, including sandals, wedges, flips and slides that cater to people of all ages. It currently carries a Zacks Rank #2 (Buy). 

The Zacks Consensus Estimate for Crocs’ 2024 earnings and sales indicates growth of 6.8% and 4%, respectively, from 2023’s reported figures. CROX has a trailing four-quarter average earnings surprise of 14.9%.

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