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.