Foot Locker: Morgan Stanley cuts PT on turnaround doubts after Q3 earnings miss

Investing.com– Morgan Stanley (NYSE:MS) decreased its value goal for Foot Locker Inc (NYSE:FL), citing continued considerations over the retailer’s means to execute a turnaround, after its disappointing third-quarter earnings and a downgrade to full-year steerage.

Foot Locker’s third-quarter outcomes missed expectations, with earnings per share falling brief as a consequence of weak comparable gross sales and gross margin efficiency. Whereas some classes, equivalent to youngsters’s footwear, confirmed modest positive factors, Morgan Stanley characterised these enhancements as primarily promotion-driven.

Morgan Stanley lowered its value goal to $16 from $17, maintains “Underweight” ranking on Foot Locker.

Administration lowered its full-year earnings steerage to a variety of $1.20 to $1.30 per share, down from earlier forecasts, a revision Morgan Stanley described as extra extreme than the third-quarter earnings shortfall alone.

The brokerage additionally lowered Foot Locker’s earnings steerage to $1.20 per share, under its earlier expectation of $1.36 apiece.

Morgan Stanley analysts mentioned they have been skeptic about Foot Locker’s optimistic projections for the fourth quarter, particularly in gentle of ongoing promotional pressures and a difficult vacation retail atmosphere.

The funding financial institution additionally flagged structural points that would weigh on firm’s long-term progress. These embrace the shift towards direct-to-consumer methods by main manufacturers like Nike (NYSE:NKE), restricted e-commerce penetration, and the challenges of managing a big retailer footprint in a declining mall-based retail atmosphere.

The agency stays “Underweight” on Foot Locker, citing dangers to earnings for each the close to and medium time period.

Foot Locker is scheduled to report fourth-quarter earnings in early 2025, with analysts watching carefully for indicators of stabilization or additional headwinds.