Foot Locker, Inc. FL is poised for continued growth, fueled by the execution of its Lace Up Plan, disciplined cost management, and investments in stores, digital capabilities and brand partnerships. The company’s consistent comparable sales (comps) growth, gross margin improvement and strong free cash flow highlight its operational resilience and financial discipline in a dynamic retail environment.

The ongoing expansion of high-return Reimagined stores, rising digital penetration and a thriving loyalty program position Foot Locker to sustain earnings growth and create long-term shareholder value as it capitalizes on evolving market opportunities.

FL Stock Past-Month Performance

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FL’s Lace Up Plan Drives Comps Growth

Foot Locker's Lace Up Plan continues to deliver strong performance, driving sales growth, improved margins and accelerated digital transformation. The company concluded fiscal 2024 with several consecutive quarters of positive comps growth, propelled by solid holiday season results.

In the fourth quarter of fiscal 2024, comps increased 2.6% from the previous year. The Foot Locker and Kids Foot Locker brands led the charge, with Champs Sports showing positive growth. FL forecasts fiscal 2025 comps growth of 1-2.5%, marking its fourth consecutive year of positive comps.

Foot Locker’s Effective Cost Management Strategy

Cost-reduction initiatives played a significant role in boosting earnings and strengthening the company's financial position, as demonstrated by its strong free cash flow generation, which highlights operational efficiency. In the fiscal fourth quarter, cost-saving measures resulted in $35 million in savings. Foot Locker exceeded its target for its $350-million cost-cutting program, achieving $100 million in savings for fiscal 2024. This was driven by reduced operational costs and lower incentive expenses, leading to enhanced overall efficiency.

The gross margin improved 300 basis points to 29.6% in the fiscal fourth quarter despite a promotional market environment. This improvement was largely driven by a recovery in merchandise margins following last year’s higher promotional activity.

For fiscal 2025, Foot Locker anticipates a gross margin expansion of 40-80 basis points, aiming for 29.3-29.7%. This growth will be supported by increased full-price selling, reduced markdowns and continued savings. Despite a fluctuating consumer spending environment, the company is prioritizing high-return investments to support long-term growth.

Adjusted EPS is expected between $1.35 and $1.65, indicating a 10% increase at the midpoint from the fiscal 2024 reported EPS of $1.37. The company anticipates a continued positive free cash flow, supported by disciplined inventory management and improved merchandise margins.

FL Gains on Store Upgrades & Digital Expansion

Foot Locker is actively optimizing its store portfolio, having refreshed more than 400 locations in fiscal 2024, with plans to update an additional 300 stores in 2025. The company is significantly expanding its "Reimagined" store concept, with 80 new locations planned for fiscal 2025. These stores are projected to generate annual sales of $4-$5 million, with a 20% EBITDA margin and 50% cash-on-cash returns, making them a highly attractive investment.

The company’s digital transformation is producing tangible results, as global digital comps increased 12.4% year over year in the fiscal fourth quarter. The launch of Foot Locker's new mobile app in the U.S. helped drive organic traffic, improved conversion rates and increased average order value. As a result, digital sales penetration grew 230 basis points year over year to 21.8% of total sales, positioning the company to meet its fiscal 2026 goal of 25% e-commerce penetration.

The relaunch of the FLX Rewards Program in mid-2024 significantly boosted customer retention, with the program accounting for 49% of North American sales in the fiscal fourth quarter, up nearly 30 percentage points from the previous year and ahead of its fiscal 2026 target. Membership grew substantially, with 3.2 million members joining in the quarter. Foot Locker plans to expand FLX to Europe in fiscal 2025, enhancing customer engagement and sales.

Is Foot Locker a Value Play Stock?

The FL stock is currently trading at a low price-to-sales (P/S) multiple, which is below the average of the Zacks Retail - Apparel and Shoes industry and Retail-Wholesale sector. With a forward 12-month P/S of 0.13, the stock is priced lower than the industry average of 1.30 and the sector average of 1.47. This makes the FL stock undervalued relative to its industry peers, presenting an attractive opportunity for investors seeking exposure to the sector. Foot Locker’s  Value Score of A underscores its appeal as a potential investment.

FL Looks Attractive From a Valuation Standpoint

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Key Challenges for FL

Foot Locker is encountering difficulties in its international markets, with a 7.6% drop in sales in the Asia-Pacific region in the fiscal fourth quarter, impacted by inflation and increased competition. The company is also struggling in South Korea and with its WSS brand in the United States, which could limit its global growth potential. Its apparel segment is underperforming, experiencing mid-teen sales declines, lacking innovation and facing strong competition.

The company is also vulnerable to currency fluctuations, which may affect profitability and create uncertainty for its 2025 revenue projections. In the fiscal fourth quarter, foreign exchange fluctuations reduced total revenues by 110 basis points. FL expects these currency headwinds to negatively impact its 2025 revenues by 100 basis points, complicating its financial outlook. As a result, Foot Locker's fiscal 2025 revenue guidance indicates a decline of 1% to a modest rise of 0.5% year over year.

In the past month, this Zacks Rank #3 (Hold) stock has plunged 31.7% compared with the industry’s 10.6% decline.

Stocks to Consider

Some better-ranked stocks are The Gap, Inc. GAP, Stitch Fix SFIX and Gildan Activewear Inc. GIL.

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for The Gap’s fiscal 2025 earnings and revenues indicates growth of 7.7% and 1.6%, respectively, from the fiscal 2024 reported levels. GAP delivered a trailing four-quarter average earnings surprise of 77.5%.

Stitch Fix delivers customized shipments of apparel, shoes and accessories for women, men and kids. It currently has a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Stitch Fix’s fiscal 2025 earnings implies growth of 64.7% from the year-ago actual. SFIX delivered a trailing four-quarter average earnings surprise of 48.9%.

Gildan Activewear is a manufacturer and marketer of premium quality branded basic activewear. It carries a Zacks Rank #2 at present.

The Zacks Consensus Estimate for Gildan Activewear’s current financial year’s earnings and revenues implies growth of 16% and 4.4%, respectively, from the year-ago actuals. GIL delivered a trailing four-quarter average earnings surprise of 5.3%.

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Foot Locker, Inc. (FL) : Free Stock Analysis Report

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Stitch Fix, Inc. (SFIX) : Free Stock Analysis Report

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