The third-quarter results of Foot Locker (NYSE:FL) should continue their momentum into the fourth quarter, says FBR Capital, driven by strong margins and sales.
FBR said, "Our FL thesis kicked into gear in 3Q, with solid execution against a strong athletic footwear cycle (now catalyzed by an emerging basketball trend) and easier compares that support material re-leveraging of the operating model driving a huge upside print. Better merchandising with greater differentiation between store concepts and superior flow of product, an emergence of a number of product catalysts in basketball (40%–50% of FL's mix), continued strength in running (as toning continues to evolve), and an apparel category that may be on the verge of sustaining positive comps (that is more profitable through mix shifts) are driving the top line, while strong inventory control, fewer and less aggressive promotional events, and a more-productive store base as a result of underperforming store closures/favorable lease negotiations bolster margins."
Foot Locker closed Monday at $18.37, gaining $0.02, or 0.11 percent. FBR has a price target of $21 on the company, along with an "Outperform" rating.
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