No Lockout at Footlocker

Forbes.com, Fall, 2011. This article was placed on behalf of the U.S. based equity research effort of institutional broker and investment bank Canaccord Genuity. It was part of a series of articles developed under an agreement with forbes.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week. The site, forbes.com is one of the top 500 sites in the world with nearly 10 million subscribers and approximately 100 million page views a month.

Canaccord consumer analyst Camilo Lyon reiterated his Footlocker (FL) BUY rating and $28 price target. Mr. Lyon said:

“Channel checks point to strong demand for basketball product, despite looming prospects for a truncated NBA season.”

He added, “We believe the key driver to supporting the positive momentum in the category is continual product introductions from Nike as well as other brands such as Adidas/Reebok and Under Armour. We remain of the opinion that basketball footwear is in the early stages of a cyclical upswing.”

Further, he said, “We believe Footlocker’s largest single margin expansion opportunity remains in improving apparel gross margins. In our opinion, the company still has 1.5 to 2% expansion of total gross margin opportunity that we believe it will begin realizing in 2012.