Foot Locker Is Stubborn
Three months ago, I posted that Foot Locker was a short
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.
Foot Locker reported earnings this week and based on the earning results, they are executing short term. Net income for Foot Locker's third quarter was $130 million, or $1.14 per share, compared to net income of $102 million, or $0.81 per share in the same period of fiscal 2017. But the kicker was same-store sales increased for the quarter for the first time in six consecutive quarters.
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. But Fook Locker is making investments into digital commerce as well. Digital comp sales were up 5.9% year over year. More importantly, the digital commerce push has allowed Foot Locker to announcement of its first digital entry to mainland China, along with a presence in Hong Kong and Singapore.
It also doesn’t hurt that earlier this year, Foot Locker started exclusively selling Nike sneakers, including the Air Max Plus, Air Max 97, and Air Max 95.
The deal was part of a "Discover Your Air" campaign and the reports are stating this also benefitted Foot Locker’s results last quarter.
The issue with the expansionary moves is that it's expensive and will squeeze margins. The trade war tariffs may also hurt Foot Locker's margins and impeded their expansion in China. So where is price going, lets go to the charts to find out?
After breaching the monthly uptrend line in June of 2017, prices have been making higher lowers and coiling up.
If price breaks to the upside, the chart suggest to short price at the $60 level.
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
Also, it will be interesting to see what the potential impact of increased producer inflation will have to its margins on top of the trade concerns.
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Can you elaborate on the producer inflation a bit more, are you talking about there input cost?
Yes! Even though oul prices have been down and will benefit margins the fact that tariffs and potential employment costs will impact margins as well.
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