Foot Locker, Inc.: FL Stock Separates Itself From the Pack

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Yes, Foot Locker, Inc. (FL) recently joined the elite firms that make up the S&P 500. But that’s not the end of the story; it’s just the beginning.

Foot Locker, Inc.: FL Stock Separates Itself From the PackHow FL stock got to where it is now — and how it will continue to post big numbers — is what I think needs more discussion.

Interestingly, Foot Locker actually began as a subsidiary of the monster five-and-dime retailer of its day, FW Woolworth’s. Many of FL’s original free-standing stores were former Woolworth stores.

As the five-and-dime generation of shopping faded, Woolworth put more of its energy into smaller boutique stores it had acquired over the years, including Foot Locker.

By 2004, FL was generating more than 70% of revenues for its parent, which then changed the name of the holding company to Foot Locker. Since then, FL stock has been going broad and deep into its core business — athletic footwear and apparel.

It now has more than 3,400 stores in eight “channels,” or specific market segments in North America, Europe, Asia and Australia.

FL Stock Gives Customers Options

As can also be said of athletic footwear megafirm Nike Inc (NKE), high-end sneakers and boutique footwear is still a place where upwardly mobile populations are still willing to buy up to land status labels.

Unlike NKE, Foot Locker sells the world’s top brands, so it’s not locked into the fate of any one trend. FL also has made great strides in its direct-to-consumer online retail as well, with its high-end brand Eastbay only offering products online or in a catalog.

As for the stock, it’s also a much better way to play this trend than NKE. First of all, it’s much cheaper, which gives it more room to grow without having runaway expectations. Its price-to-earnings ratio of 17 is nearly half of NKE’s. And FL has a solid 1.7% dividend.

Any bad news out of NKE will have serious repercussions on the stock. FL stock doesn’t have that high a risk.

Also, with FL just added to the S&P 500, Foot Locker will gain more investors simply because it’s now part of one of the most widely traded indexes in the world. When pension managers or institutions buy index funds, they will now be buying FL stock along with them.

Finally, the stock has been doing very well over the long term, and that trend is likely to continue, regardless of how fast or slow global growth is. The fact is, more people around the world are entering the middle class, and whether the pace is quick or slow, it’s a moot point. The market is expanding.

Foot Locker is up 225% in the past five years. It’s up over 3% in March. This trend will continue … maybe not in a straight line, but one with a definite upward bias.

Plus, any down moves make FL stock an even better buy.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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