Foot Locker, Inc. (FL) looks attractive - VH style

It's that simple America. The washed-up foot retailer is starting to look like a decent investment. Can you remember the last time you visited a Foot Locker, Inc. (NYSE:FL)? Neither can I. Despite taking their stock taking a huge nose dive back in May after they slashed their first-quarter earnings outlook on citing a 5.1% fall in quarterly same-store sales, FL shares are quietly coming back to life.

In the last month alone Foot Locker shares are up 6%. Foot Locker still wears the crown as the largest U.S. athletic-shoe retailer and despite disappointing Wall Street in May, they still have one thing going for them that I really like: Year over year increasing revenue.

I don't care if these guys keep growing at a Bidu.com (BIDU) pace, the fact of the matter is, they are making more money every quarter. If I buy FL shares, I'm not expecting a huge surge in share price any time soon, but it's headed back up. Foot Locker is a big company, not Starbucks (SBUX) big, but they hold their own with a $3.47 billion market cap.

Foot Locker's 52-week range is between $20.74 and $28 a share. Shares of FL are trading right now around $22 a share and the stock is challenging its 50 day moving average. Volume of FL shares has picked up this week because investors are coming around to the idea that Foot Locker isn't such a bad investment. Let's face it people, their stores are everywhere: Lady Foot Locker, Kids Foot Locker, Champs Sports and Footaction - you see these at every mall in America.

I don't care what Wall Street says about this company, and with shares trading at the "cheap" end, it's worth the risk. Today (June 28th) Matrix Research downgraded Foot Locker Inc from "buy" to "hold." They said:
Customers’ shift from athletic shoes to general-use sneakers and rising competition from warehouse clubs and discount stores are adversely affecting the company’s sales. Foot Locker’s sales growth and EVA declined from 1.7% to 1.1% and from -$187 million to -$293 million, respectively, over the past 12 months, the analysts say. Although Foot Locker is collaborating with Nike to open fifty "House of Hoops" stores away from malls in the forthcoming three years, the strategy is unlikely to significantly boost the company’s near-term results.

Okay so that's the "near-term" - I'm cool with that, I'm not expecting to make money over night like some kind of Michael Parness scam and turn $30,000 into $7 million, or whatever he does. I'm talking about minimizing your risk and making you some cash buy purchasing a stock that has been beat up and can turn it's frown up sidedown.

Despite today's downgrade, traders are buying up Foot Locker shares and they're only doing it because they know it's going to make them money.

So what's not to like?

Standard & Poor's Ratings Services said on 6/20 its ratings, including the 'BB+' corporate credit rating on Foot Locker, Inc. remain on negative watch after Genesco Inc accepted a rival offer from The Finish Line (FINL) for $1.53 billion. Add to that Wall Street thinks they suck, but America -- it's only a matter of time before they all think Foot Locker is undervalued and rate it as a "Buy".

Same song, same dance. So "Dance the Night Away" Van Halen style, or sit back and wait for Wall Street to say FL is okay? I vote Foot Locker is looking so fine and pretty and maybe fooled me with her style and ease. And sure I feel her from across the room. But yes, it’s love in the third degree.

Article written by: Frank Lara Jr.
Article posted on: June 28th, 2007

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Disclaimer: The Author just convinced himself to buy shares of FL and hold a long position.