Benzinga | Jan 4, 2022 11:12AM EST

Why This Foot Locker Sees Margin Pressure Ahead

Foot Locker, Inc. (NYSE:FL) is likely to lose market share, with the expansion of global brand Solo Brands Inc (NYSE:DTC) and wholesale competition, according to JPMorgan.

The Foot Locker Analyst: Matthew Boss downgraded Foot Locker from Neutral to Underweight and reduced the price target from $60 to $42.

The Foot Locker Thesis: The company is likely to suffer "multi-year margin pressure points on both COGS (rising occupancy costs) & SG&A (wages/DC costs), Boss said in the downgrade note.

There is likely to be "a mixed bag setup on Specialty Softlines," he added.

"P/L specific, we model FY23 EPS power ~30% below the Street (JPM at $5.06 < Consensus at $6.94) lowering our FY22 EPS to $5.57 (below Street at $6.54) embedding 1H22 EPS ~40% below Consensus (JPM $1.97 < St $3.24) w/ 1Q $0.89 (~50% < St. $1.69)," the analyst wrote.

FL Price Action: Shares of Foot Locker were down 4.07% at $42.94 late Tuesday morning.

Photo by Dwight Burdette via Wikimedia.