Foot Locker Falls as JPMorgan Goes Underweight With 30% Downside

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Foot Locker Falls as JPMorgan Goes Underweight With 30% Downside
Credit: © Reuters.

By Dhirendra Tripathi – Foot Locker stock (NYSE: FL ) fell more than 3% Tuesday after JPMorgan downgraded the stock to underweight with a target of $42, down 30% from analyst Matthew Boss’ previous target of $60.

The stock touched a low of $42.51 during the session that’s still underway. Boss was earlier neutral on the stock.

The analyst cited the combination of market share compression in an expanding addressable market for athletic wear and “multi-year margin pressure points” for his pessimism on the stock. Higher cost of goods sold and elevated selling, general administrative expenses including fatter wages and direct costs are likely to weigh on the company, according to Boss.

According to reports, the analyst believes the company faces risks from Nike 's (NYSE: NKE ) direct-to-consumer strategy.

When it announced its third-quarter numbers in November, the footwear retailer handed out a less-than-confident outlook heading into the busiest time of the year.

"We expect global supply chain constraints to persist throughout the fourth quarter,” the company said, although it insisted that it has "positive momentum and inventory levels ready to meet customer demand."

Total sales in the third quarter rose 4%, to $2.18 billion. Comparable sales were up only 2.2%. Adjusted profit per share came in at $1.93 compared to $1.21 in the same period last year.

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