I Think Foot Locker Is A Short, Long Term
On Friday, Foot Locker beat top and bottom line estimates. Nevertheless, the stock price dropped 10% because comparable same store sales only grew 0.5%, short of expectations.
But why is Wall Street rewarding Nike, but not Foot Locker, when Nike products represent 67% of Foot Locker’s merchandise and this past week, Foot Locker just started exclusively selling Nike sneakers including the Air Max Plus, Air Max 97, and Air Max 95, as part of its 'Discover Your Air' campaign. As Nike goes, shouldn’t Foot Locker go?
Well, not anymore as denoted by the chart below. Nike and Foot Locker were both positively correlated, then things changed at the beginning of 2017.
Major department stores such as J. C. Penney, Macy’s, Sears, and Kmart have announced hundreds of store closures, and well-known apparel brands such as J. Crew and Ralph Lauren are unprofitable. Of the 1,200 shopping malls across the US, 50% are expected to close by 2023. More than 12,000 stores are expected to close in 2018, and only 4,000 of them have been planned by several retailers. Several retailers such as Toys "R" Us and The Bon-Ton have liquidated and closed all their stores.
Although Foot Locker highlighted brand partnerships with companies likes of Nike, Inc., Asics Corporation and Adidas AG during their conference call, once a train is in motion, it’s hard to stop it. The train I’m talking about is the e-commerce train with Amazon serving as the conductor. In addition, Foot Locker’s business model of serving as the middle man to sneaker manufacturer is total opposite to Nike’s future strategy of direct to consumer shoe seller.
NOTE: earlier in the post, I mentioned when Nike products represent 67% of Foot Locker’s merchandise.
When I go to the charts, the picture is even more dismal.
Note to self, you really need to get better at setting alerts, because you could of shorted Foot Locker during the pull back in June when price touched the $59 level.
On the monthly chart, price broke the short term and long term trendline. Price also formed a double top with RSI making lower highs. Thus, I have two targets to the downside. The first one is at $35 and my longer term target is $10. I’m expecting to hit the $10 within the next 3-4 years, with the inevitable market crash serving as a catalyst.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
Fl is like that. It bombs on earnings and tanks.
good work...soon..(not yet) the entire market a "short"...(equities). thanks for your support.
I really feel for many of these retail stores.