Foot Locker May Not Gain Traction Until 2018

Prior to Foot Locker, Inc. (NYSE: FL)'s devastating second-quarter report, no analysts held a particularly bearish stance toward the company. That has quickly reversed course, with Canaccord Genuity joining in on the downgrades, lowering its rating from a Buy to a Hold.

“At issue is a soft product cycle, broadening distribution of similar product, and rapidly changing consumer brand preferences,” said Canaccord Genuity analyst Camilo Lyon Monday.

Lyon cited the need for speed from both retailers and vendors has never been more important than it is today. With the rise of fast fashion and the speed at which consumer preferences are changing, retailers and brands are working diligently to alter their manufacturing and supply chain management structures to accommodate (see Lyon's track record here).

Related Link: Breaking Down The Footwear Sector: Adidas Pipeline Still Strong, Under Armour Under Pressure

Foot Locker is working with its vendor partners to shorten lead times and deliver product much closer to demand trends, but until this happens, Canaccord believes it would be best to step to the sidelines until product trends improve.

“With deep promotions likely to plague the US market through year end, coupled with trends that suggest future innovation is coming in lifestyle and running silhouettes, we believe FL comps could be under pressure until mid-2018,” said Lyon.

Canaccord Genuity lowered its price target on Foot Locker from $64 to $39.

Shares of Foot Locker closed down over 7 percent Monday.

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