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Takeaway: We are adding Foot Locker to Investing Ideas today.

Stay tuned. We will send out a full analyst report outlining our high-conviction short thesis early next week.

In the meantime, here is a brief excerpt from a research note sent to institutional subscribers from Retail analyst Brian McGough on FL:

"We remain confident that Foot Locker will prove to be one of the best multi-year shorts in retail. The company is likely to earn about $4.20 this year, which we think will prove to be the high water mark in this economic cycle.

 

We think that emerging competition from its top vendor, Nike (=80% of sales), will stifle growth, and leave the company with an earnings annuity somewhere around $3.50-$3.75 per share. Is that worth $61? Not a chance. Not for a company that is Nike’s best off-balance sheet asset. And definitely not when the Street is in the stratosphere approaching $6.00 in EPS (#NoWay)."

FL: Adding Foot Locker to Investing Ideas (Short Side) - footlocker