With a yield of 5%, is Foot Locker a good stock to add to your dividend portfolio?

Foot Locker, Inc. (FL) in New York operates as an athletic footwear and apparel retailer. The company announced a new, enhanced partnership with Adidas AG (ADDYY) based on product innovation, enhanced experiences and deeper customer connectivity. Its current dividend yields 4.91%. It paid a quarterly dividend of $0.40 per share, totaling $38 million during the first quarter of 2022.

ADDYY reported mixed first quarter results. While its sales for the quarter missed the consensus estimate of 1.9% by 1.9%, its adjusted EPS exceeded Street’s estimate by 8.8%.

The stock is down 26.9% over the past six months to close yesterday’s trading session at $32.59. Moreover, it is currently trading 49.1% below its 52-week high of $63.98, which it reached on June 25, 2021.

Here’s what could influence FL’s performance in the coming months:

Updated assessment

In terms of forward P/B, the FL of 0.98x is 59.5% lower than the industry average of 2.42x. Its forward P/S of 0.37x is 58.7% below the industry average of 0.89x. Additionally, the stock’s non-GAAP P/E and EV/S of 7.27x and 0.70x respectively are below industry averages of 12.17x and 1.10x.

Revenue growth does not translate into improved bottom line

For its first fiscal quarter, which ended April 30, 2022, FL’s sales jumped 1% year-on-year to $2.18 billion. However, its operating profit was down 23% year-over-year to $217 million, while its adjusted net profit was $155 million, down 24%. .4% year over year. Additionally, its adjusted EPS was $1.60, down 18.4% year-over-year.

Low profitability

In terms of CAPEX/sales over the last 12 months, FL’s 2.33% is 18.4% below the industry average of 2.85%. Its gross profit margin of 34.02% over the last 12 months is 6% below the industry average of 36.18%.

Unfavorable analyst estimates

For the quarter ending July 31, 2022, analysts expect FL EPS and revenue to decline 60.6% and 7.7%, respectively, year-over-year to 0 .87 and 2.10 billion.

POWR ratings don’t indicate enough advantage

FL has an overall C rating, which equates to a neutral in our POWR rating system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.

Our proprietary scoring system also rates each stock against eight distinct categories. The stock has a D rating for Sentiment. This is justified because analysts expect a drop in its EPS in the short term. Additionally, FL has a C rating for stability, which matches its 1.27 beta.

FL is ranked #28 out of 37 stocks in the athletics and recreation industry. Click here to access FL ratings for Value and Momentum.

Conclusion

FL may continue to decline in the near term due to concerns over supply chain disruption and high inflation. So we think it might be wise to wait for a better entry point in the title.

How does Foot Locker (FL) compare to its peers?

Although FL has an overall POWR rating of C, one might consider investing in the following athletics and recreation stocks with a B (buy) rating: Vista Outdoor Inc. (VSTO), MarineMax, Inc. (HZO) and MasterCraft Boat Holdings, Inc. (MCFT).


FL shares were trading at $33.07 per share on Thursday afternoon, up $0.48 (+1.47%). Year-to-date, FL is down -22.62%, compared to a -12.21% rise in the benchmark S&P 500 over the same period.

About the Author: Nimesh Jaiswal

At Nimesh Jaiswal a fervent interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving the price of a stock is the key approach he follows while advising investors in his articles. After…

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