Foot Locker, Inc. – Value Analysis (NYSE:FL) : May 16, 2017

Capitalcube gives Foot Locker, Inc. a score of 88.

Our analysis is based on comparing Foot Locker, Inc. with the following peers – Genesco Inc., Finish Line, Inc. Class A, DSW Inc. Class A, Shoe Carnival, Inc., NIKE, Inc. Class B, Caleres, Inc. and Belle International Holdings Limited Unsponsored ADR (GCO-US, FINL-US, DSW-US, SCVL-US, NKE-US, CAL-US and BELLY-US).

Investment Outlook

Foot Locker, Inc. has a fundamental score of 88 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It currently trades at a Price/Book ratio of (3.55).
  • FL-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • FL-US has relatively high profit margins while operating with median asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • FL-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While FL-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s level of capital investment seems appropriate to support the company’s growth.
  • FL-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

FL-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 1.58% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 2.18%), and a well-cushioned interest coverage level of 91.91x, FL-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • Of the 7 chosen peers for the company, only 3 of the stocks have an outstanding debt balance (including GCO-US, NKE-US and CAL-US). Companies with no debt include FINL-US, DSW-US, SCVL-US and BELLY-US.

FL-US has maintained its Quick & Able profile from the prior year-end.

  • FL-US‘s interest coverage is its highest over the last four years and compares to a low of 56.55x in 2013.
  • While its interest coverage increased to 91.91x from 85.73x (in 2016), its peer median decreased during this period to 91.91x from 131.80x.
  • Interest coverage rose 46.08 points relative to peers.
  • FL-US‘s debt-EV is similar to last year’s low of 1.55% and remains below the 2014 high of 3.03%.
  • Though its debt-EV has remained relatively stable at 1.58% compared to 2016, its peer median has increased to 2.18% from 1.54% during this period.
  • Relative to peers, debt-EV fell 0.61 percentage points (and is now lower than its peer median).

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Genesco Inc. 9.55 2.39 26.19 136.99
Finish Line, Inc. Class A 0 2.21 255.22 999
DSW Inc. Class A 0 2.4 714.38 999
Shoe Carnival, Inc. 0 4.08 0 999
NIKE, Inc. Class B 3.82 3.07 65.46 128.84
Caleres, Inc. 20.05 1.59 8.27 58.4
Belle International Holdings Limited Unsponsored ADR 2.77 4.35 250.98 322.74
Foot Locker, Inc. 1.58 4.28 91.91 617.12
Peer Median 2.18 2.74 91.91 469.93
Best In Class 1.58 4.35 714.38 999

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Company Profile

Foot Locker, Inc. engages in the global retail of athletically inspired shoes and apparel. It operates through the following segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment operates athletic footwear and apparel retailers in the world, with brands that include Foot Locker, Lady Foot Locker, SIX:02, Kids Foot Locker, Champs Sports, Footaction, Runners Point and Sidestep. The Direct-to-Customers segment includes Footlocker.com, Inc. and other affiliates, including Eastbay, Inc., and company’s international ecommerce businesses, which sell to customers through their Internet and mobile sites and catalogs. The company was founded in 1989 and is headquartered in New York, NY.

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