We think FL is a Long at $18.50. We added this to our Best Ideas list on the latest earnings puke (at $16.50), and think that this name is at least a double over a 2-year duration. While we believe in the tweaks that Mary Dillon (new FL CEO) can make to the model to return to a normalized mid-single digit EBIT margin (currently sitting at about 2%) we think the real driver here is Nike. Two years ago Nike represented 76% of FL’s store, and now (all Nike’s doing) it’s down to 50%. For many reasons – none which investors currently believe – we think that ratio marches up above 60% over a 2-year time period, which should put FL back into a sustained comp upcycle that should drive margins to the high single digits and earnings above $6 per share – suggesting that the stock is trading at 3x underlying earnings today – about as cheap as the stock has ever been (not even accounting for the value of its stake in GOAT). We’ll be presenting the full investment case and will dig deep into the model drivers and margin levers in our Black Book.
Call Details:
Wednesday September 20 at 12:30pm ET
Live Video Link CLICK HERE
Add To Calendar CLICK HERE
