49,700 527

Buy - Price 10.34 on Aug. 24
by Sterne, Agee & Leach

We are cutting our 2009 and '10 EPS estimates to 72 cents and 90 cents from 84 cents and $1, respectively. We believe FL can easily attain our estimate without a significant sequential acceleration in [same-store-sales], in light of incredible leeway available in sales general and administrative expenses and merchandise margin. We do not anticipate the SGA cuts will be as severe in [second-half] '09, but there is much room for improvement [via] cost-cutting....Valuation is 4.5 times '09-estimated [earnings before interest, taxes, depreciation and amortization]; dividend yield is an attractive 5.75%. Target: 13. Market cap: $1.6 billion.

Foot Locker's stock, now around $10, could rally to $15 in the next year as the retail climate improves. Shares currently sell below book value of $12.58.

I don’t have a lot of retail exposure right now, adds Karen Finerman, except for a little Foot Locker (FL).

Finerman said she likes Foot Locker(FL), which she says will benefit from the stimulus and has a good balance sheet and cash.

Over sold.
8.17

“And if you want to take a long shot on a fallen angel," look at Footlocker [FL] for it’s balance sheet.

VOLUME AND PRICE

fluctuates everyday at least $0.10

But have shares priced in most of the bad news? At about 11.22, the stock has slipped to a five-year low, and is below levels where its CEO has recently bought shares. Today, Foot Locker is valued at just 0.8 times its book, or accounting, value, compared with four times for apparel retailers. The stock trades at 12.2 times 2009 earnings, compared with 15.2 times for smaller rival Finish Line (FINL) and 15.1 times for Dicks Sporting Goods (DKS). After a distracting and ultimately failed attempt to buy rival Genesco (GCO), "management is refocusing on running lean and mean, and sales may be at trough levels," says M. Kevin Flynn, president of Lexington, Mass.-based Avalon Asset Management. Pricier items are still moving well, sales at European and Asian stores are still chugging along, and the company has made more headway in clearing out its glut of mid-price inventory. "Although the current retail environment is difficult, this may prove an opportunistic time to build positions in retailers with good balance sheets and strong cash generation," Flynn says. He sees maximum stock downside at about 9 if the U.S. slips into a vicious and prolonged recession and if the Dow falls to 11,000. But Foot Locker has a cash stash of more than $3 a share, and an annual dividend yield of about 5.2%, all of which should provide a little cushioned support if the going gets tough.