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Foot Locker, Inc. FL is currently trading at a low price-to-sales (P/S) multiple, which is below the average of the Zacks Retail - Apparel and Shoes industry and Retail-Wholesale sector. With a forward 12-month P/S of 0.17, FL is priced lower than the industry average of 1.39 and the sector average of 1.47.
FL Stock Looks Attractive From a Valuation Standpoint
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This makes FL stock undervalued relative to its industry peers, presenting an attractive opportunity for investors seeking exposure to the sector. Furthermore, Foot Locker’s Value Score of A underscores its appeal as a potential investment. In the past month, FL stock has plunged 21.1% compared with the industry’s 11.5% decline. This underperformance may present a strategic entry point for investors evaluating potential upside.
FL Stock Past Month Performance
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FL’s Lace Up Plan Drives Comparable Sales Growth
Foot Locker’s Lace Up Plan is driving strong sales growth, margin expansion, and digital acceleration. The company ended fiscal 2024 with multiple consecutive quarters of positive comparable sales growth, fueled by strong holiday performance.
In the fourth quarter of fiscal 2024, comparable sales rose 2.6% year over year. The Foot Locker and Kids Foot Locker banners led the way, with Champs Sports also showing improvement. Gross margin improved 300 basis points to 29.6%, despite a promotional environment. This was fueled by a recovery in merchandise margin from the prior year’s higher promotions.
FL’s Strategic Cost Management
Cost-saving efforts contributed to higher earnings and reinforced the company’s financial position, with significant free cash flow generation highlighting operational efficiency. Cost-saving initiatives delivered $35 million in the fiscal fourth quarter. Also, Foot Locker achieved $100 million in savings in fiscal 2024 as part of its $350 million cost-cutting initiative, surpassing its $90 million target. Reduced operational expenses and lower incentive costs helped improve overall efficiency.
For fiscal 2025, Foot Locker expects gross margin expansion of 40-80 basis points, reaching 29.3-29.7%. This will be supported by stronger full-price selling, lower markdowns, and ongoing savings. Despite a dynamic consumer spending environment, the company is prioritizing high-return investments to ensure long-term growth.
Strategic Initiatives & Favorable FY25 Outlook of FL
The store portfolio is being optimized, with 400+ store refreshes in fiscal 2024 and 300 more planned in 2025. The "Reimagined" store concept will expand significantly, with 80 new locations expected in fiscal 2025. These stores are expected to generate annual sales of $4-$5 million with 20% EBITDA margins and approximately 50% cash-on-cash returns, making them a highly attractive investment.
Foot Locker’s digital transformation is delivering measurable outcomes, with global digital comparable sales increasing 12.4% in the fiscal fourth quarter. The introduction of the company’s new mobile app in the United States helped boost organic traffic, enhance conversion rates, and raise the average order value. Consequently, digital sales penetration grew 230 basis points year over year, reaching 21.8% of total sales, putting the company on track to achieve its fiscal 2026 goal of 25% e-commerce penetration.
The relaunch of its FLX Rewards Program in mid-2024 boosted customer retention, reaching 49% of North American sales in the fiscal fourth quarter, nearly 30 percentage points higher than last year, ahead of its fiscal 2026 target. Membership grew significantly, adding 3.2 million new members in the quarter. The company plans to expand FLX to Europe in fiscal 2025 to further increase engagement and sales.
Foot Locker anticipates fiscal 2025 comparable sales growth of 1-2.5%, marking its fourth consecutive year of positive comps. Adjusted EPS is projected at $1.35-$1.65, reflecting 10% growth at the midpoint relative to fiscal 2024’s $1.37 earnings per share. The company expects continued positive free cash flow, supported by disciplined inventory management and improved merchandise margins.