Foot Locker (FL) Stock Trades Up, Here Is Why

What Happened?

Shares of footwear and apparel retailer Foot Locker (NYSE:FL) jumped 5.8% in the afternoon session after the company announced a multi-year partnership with the Chicago Bulls, one of the most iconic basketball franchises. This partnership has the potential to improve Foot Locker's brand image and help attract more customers, especially basketball fans. It could also help create new marketing channels that can lead to higher sales in the U.S. market. Overall, the stock's reaction suggests investors are optimistic about the potential the partnership can unlock.

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What The Market Is Telling Us

Foot Locker’s shares are extremely volatile and have had 35 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 5 months ago when the stock gained 28.2% on the news that the company reported first-quarter results that blew past analysts' EPS expectations. While comparable sales decreased, this was mostly driven by the continued repositioning of the Champs Sports banner. Core banners strengthened as Global Foot Locker and Kids Foot Locker comparable sales increased 1.1%. Inventory levels improved, with merchandise inventories down 5.6%, indicating a better handle on stock management, which should potentially mitigate the risk of future markdowns. 

Moving on, guidance was likewise solid as its full-year earnings guidance exceeded Wall Street's estimates. In line with the company's retail strategy, Footlocker announced plans to open four more locations in the year, which could be a sign that the growth and turnaround strategy are working. Zooming out, we think this was a fantastic quarter that should have shareholders cheering.

Foot Locker is down 18.8% since the beginning of the year, and at $25.05 per share, it is trading 28.7% below its 52-week high of $35.15 from February 2024. Investors who bought $1,000 worth of Foot Locker’s shares 5 years ago would now be looking at an investment worth $569.84.

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