With the turmoil and pressure the activewear market is seeing, and the strong shoe game that Amazon is presenting, it seems Foot Locker is holding its own quite well, and is actually undervalued, according to analysts.
While the athletic footwear market has experienced some tough times, especially in light of major e-commerce companies like Amazon, who are raking it in, in that department, some analysts are looking closer at Foot Locker, to call it as it is.
“We believe Foot Locker can withstand the challenge from Amazon,” said Morgan Stanley analysts, Jay Sole and Edward Ryan, in a note earlier this week.
Under five percent of Foot Locker’s 200 best-selling shoes are currently sold on Amazon, according to the analysis, with the top athleticwear brands, including Nike and Adidas, still preferring to sell its shoes through Foot Locker, priced on average at US $130 a pair.
“Amazon has positioned itself as a mid-market/mass retailer. It carries essentially none of the top selling, high-end styles from Nike and Adidas and we don’t think that will change,” the note said. “We expect FL (Foot Locker) to surprise the market by returning to 3-5% comp growth over the coming quarters.”
The higher-end athletic shoe market makes up roughly 20 to 25 percent of the total footwear market in the US, according to the Morgan Stanley analysts, while with Amazon, is seems more focused on the larger, lower-end shoe market.
“We think brands will continue to allocate to Foot Locker a high-end product assortment which includes many styles consumers can’t find anywhere else,” said the note. “This unique high-end product offering is what will sustain Foot Locker over the long term.”
If Foot Locker were to never grow further, it would still be valued more than it’s what it’s trading at, according to another recent note, from Barclays.
“In a scenario where Foot Locker does not experience any growth in perpetuity, we achieve a $51 valuation, higher than its current price: This scenario assumes flat comp store sales and flat square-footage growth over the next 10 years,” said Barclays analyst Matthew McClintock.
Foot Locker’s share target was lowered from $70 to $65 – the retailer defended its position, saying that late tax claims interrupted its efforts to focus on store sales and traffic. The fact that Nike has now agreed to sell products directly to Amazon does not help either, which adds further to the threat faced by bricks and mortar retailers.
Nevertheless, Foot Locker is the number one seller of Nike shoes in the US, with several analysts of the view that the retailer is up for the challenge to stay in the top spot, saying the key to its success lies in ensuring it is the number one destination for sports footwear and sneakers.
The New York based speciality retailer announced in its first quarter earnings report for 2017 that it would be focusing on enhancing its e-commerce platforms in the 23 countries it operates in globally; Europe is expected to be a growth catalyst for the company, which has focusingn focising on its Australian e-commerce operations, where it has somewhat lagged behind in the digital age of retail and the consumer.
In July this year, Foot Locker Australia launched its first ever e-commerce platform in, marking a major milestone for the company stepping into the digital age of Australia’s tech savvy consumers.