Option Trade 
Foot Locker, Inc. (NYSE:FL) Calls 
Wednesday, 24 February, 2016

**OPTION TRADE: Buy the FL May 2016 70.000 call (FL160520C00070000) at approximately $2.30. Place a pre-determined sell at $4.60.

Note: No protective stop losses added -- but if you wish to do so make it $0.95.

by Ian Harvey

February 24, 2016

Foot Locker, Inc. (NYSE: FL), is slated to release fourth-quarter fiscal results on February 26th, and it is expected that the retailer of athletic shoes and apparel will be able to continue with its positive earnings surprise streak in the quarter to be reported.

By continually exploiting opportunities like kids' and women's business, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments, Foot Locker is likely to benefit in the quarter to be reported. The company is also well positioned to reap the benefits from the so-called "athleisure" trend that has been sweeping the retail sector as consumers are now opting for more comfortable and athletic style products.

The company has a market capitalization of $9.13 billion and a P/E ratio of 17.86. The firm’s 50 day moving average is $65.28 and its 200 day moving average is $67.77. Foot Locker has a 52 week low of $55.40 and a 52 week high of $77.25.

Driving Factors

1. Foot Locker has consistently grown sales and profits and exceeded its estimates for the past two years. The stock is attractively valued as compared to its industry and the broader market.

2. Foot Locker benefits from the sales of other successful companies such as Nike (NYSE:NKE) and brands such as Adidas, Jordan, Puma, ASICS, etc., whose products are sold in its brick and mortar stores (Athletic stores segment) and online (Direct to Consumer segment).

3. The footwear category is Foot Locker's strongest product category, which achieved a double-digit sales increase for fiscal Q3. The apparel category achieved a mid-single digit sales increase. Overall, Foot Locker achieved an 8% comp stores sales increase for Q3.

4. The upcoming Summer Olympics set for August 2016 in Rio de Janeiro, Brazil, is likely to act as a catalyst for the company.

5. Foot Locker's strategy for store expansion into new regions will also help the company grow revenue and earnings going forward. The company sees Europe as a good opportunity for expansion.

6. Foot Locker already has a good store presence in countries such as Italy, Germany, Ireland, Portugal, and the Netherlands. However, there is opportunity for expansion in key countries such as France, Spain, and the U.K., where the company operates some stores, but sees more opportunity for growth.

7. Another strategy that Foot Locker is focused on is the expansion of women's stores.

Stock analysts at FBR & Co. increased their FY2017 earnings per share estimates for Foot Locker in a research note issued to investors on Monday. FBR & Co. analyst S. Anderson now expects that the firm will post earnings per share of $4.65 for the year, up from their previous forecast of $4.62. The consensus estimate for Foot Locker’s FY2017 earnings is $4.74 per share. FBR & Co. also issued estimates for Foot Locker’s Q1 2017 earnings at $1.22 EPS and FY2018 earnings at $5.08 EPS.

Also, Foot Locker, Inc.‘s stock had its “buy” rating reiterated by research analysts at Citigroup Inc. in a research note issued on Tuesday, last week.

FL has also been the subject of several other research reports:-

• Credit Suisse started coverage on shares of Foot Locker in a research report on Friday, February 5th. They issued a “neutral” rating and a $70.00 price target for the company.

• Vetr upgraded shares of Foot Locker from a “buy” rating to a “strong-buy” rating and set a $72.50 price target for the company in a research report on Wednesday, December 16th.

As well, other large investors recently made changes to their positions in the company.

• Capstone Asset Management Company raised its stake in shares of Foot Locker by 927.8% in the fourth quarter. Capstone Asset Management Company now owns 141,264 shares of the company’s stock worth $9,195,000 after buying an additional 127,520 shares in the last quarter.

• Alpha Windward bought a new stake in shares of Foot Locker during the fourth quarter worth $433,000.

• BB&T Securities bought a new stake in shares of Foot Locker during the fourth quarter worth $399,000.

• Pensionfund Sabic bought a new stake in shares of Foot Locker during the fourth quarter worth $1,302,000.

• Finally, Waverton Investment Management Ltd raised its stake in shares of Foot Locker by 32.1% in the fourth quarter. Waverton Investment Management Ltd now owns 100,000 shares of the company’s stock worth $6,509,000 after buying an additional 24,300 shares in the last quarter.

Six analysts have rated the stock with a hold rating, seventeen have given a buy rating and one has assigned a strong buy rating to the company’s stock. The stock presently has an average rating of “Buy” and a consensus price target of $74.28.

Harvey’s Options Volatility Indicator

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the FL May 2016 70.000 call (FL160520C00070000) at approximately $2.30. Place a pre-determined sell at $4.60.

Note: No protective stop losses added -- but if you wish to do so make it $0.95.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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