Fun with numbers: Foot Locker

Foot Locker Retail, Inc. is an american Footwear-retailer, from New York City, which is operating worldwide. What’s interesting about them is that their success is mostly unnoticed from the crowd. The stock is near a 52-Week low. First let’s look at the negative things…

Sneaker

Photo: “Sneaker” from Hernán Piñera under CC.

Cons:

Foot Locker is a retailer, I am not a big fan of that business (they have to win their customers on a daily basis)

Maybe their success is mostly achieved through an expansion in sneaker demand because of some fashion trends that will not continue in the future?

Salary of the CEO looks quite high to me (8,2 mn$) compared to Whole Foods (~2,1 mn$) but still OK compared to Staples Inc (12,4 mn$)

 

Pros:

Very nice performance in the past, they grew nicely, steadily and they paid a dividend

The stock is not expensive (I think); stock is not followed much – even I didn’t wanted to looked at them in the first place

The trend to a healthier lifestyle may help them in the future

Ownership:

Major Holders according to Yahoo

They have a quite common Institutional shareholder base, nothing worth mentioning.

Richard A. Johnson the President and CEO holds 282,399 stocks according to Yahoo, at current prices that’s about 2 years of this salary.

 

Fun with numbers:

I played around with some numbers from the 2015 Foot Looker annual Report. This is my Model:

Bildschirmfoto 2016-05-09 um 19.54.15

The revenue and “sales per gross Square Foot” -growth from 2011 till 2015 (highlighted green) is looking amazing. And they are planing to doing it again. From the FULL YEAR RESULTS -News release:

“Building on those leadership positions, we believe we can continue to elevate our financial performance in 2016 by generating a mid-single digit comparable sales gain and another double digit percentage increase in earnings per share.“

I calculated with a revenue growth of 7-5% (which I consider conservative)

I assumed a EBIT-Margin expansion through scale from 13% to 14% which would translate in a Net Income Margin of 8,96% in 2020. Net Income in 2020 would be 884 mn$.

The EV is now at about 7,55 bn$ EV according to Yahoo Finance

I assumed an aggressive share buyback of -2,3% per year.

Earnings per share in 2020 would be 7,19$ – I guess a stock of that quality could be sold for 15 times earnings. So that would be 107.85$ in year 2020. The price today is around 62$. That is a pretty nice upside of around 70% – not bad.

 

Bottom line:

If my assumptions are correct Foot Locker will nearly double the EPS till 2020. Considering that they already did this in the past, maybe that is not far from reality – we will see. I strongly considering buying them but I have to look closer at the comprehensive income, pensions, management and other stuff before I will make a judgement.

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One thought on “Fun with numbers: Foot Locker

  1. Pingback: Foot Locker, everything is running well | valuetradeblog

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