Opinions Jim McGovern
Foot LockerFLTOP PICKOct 03, 2016
Jim McGovernStock price when the opinion was issued
As of Sep 05, 2025. Market Open.
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In late 2022, he believed too much in a CEO who couldn't turn around an awful company. The CEO had a great track record and warned the turnaround could take a long time. So, he was patient and bought a small position. A big mistake. His mistake. Hubris. A turnaround can take a very long time.
She had great faith in the new CEO whom he interviewed last March and bought a small position. The CEO came with a strong track record. He knew that turning around FL was a giant job, but it was impossible. He blew this call. FL was a flailing mall-based retailer. They reported ugly quarters in May and August, the latter reporting that sales sank 10% YOY and earnings -96% YOY. Lots of excess inventory. Awful. FL also halted their dividend, which is why many bought this stock. He was blinded by the CEO's great track record (and still believes in her), but the company had no chance for a turnaround. He should have known better.
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*SHORT* The challenge is that their biggest customer is Nike (NKE-N), about 70% of their business. Nike is making a very strong push direct to the consumer, a lot of it through the e-commerce program. Footlocker has got their #1 customer reducing their emphasis on mall and store sales. Their competitive response is that they’ll either have to find other suppliers, which costs money, or develop their own the e-commerce business. For them to make the necessary investments in either case, their cost of sales is far too low. This Short is for the next 2-3 years. Dividend yield of 1.63%.