FOOT LOCKER INC - TheStreet

July 19, 2015

NYSE: FL

FOOT LOCKER INC

A+

A

BUY A- B+

B

HOLD B- C+ C C- D+

D

SELL D- E+ E

E-

BUY RATING SINCE

F

TARGET PRICE

04/07/2010 $91.78

Annual Dividend Rate

Annual Dividend Yield

Beta

$1.00

1.43%

1.11

Market Capitalization $9.7 Billion

52-Week Range $47.11-$71.00

Price as of 7/16/2015 $69.93

Sector: Consumer Goods & Svcs Sub-Industry: Apparel Retail Source: S&P

FL BUSINESS DESCRIPTION Foot Locker, Inc. operates as an athletic shoes and apparel retailer. The company operates in two segments, Athletic Stores and Direct-to-Customers.

Weekly Price: (US$) SMA (50)

SMA (100)

STOCK PERFORMANCE (%)

3 Mo.

Price Change

15.11

1 Yr. 3 Yr (Ann)

45.08

28.66

GROWTH (%)

Revenues Net Income EPS

Last Qtr 2.56 13.58 17.27

RETURN ON EQUITY (%)

FL

Q1 2015

21.21

Q1 2014

17.47

Q1 2013

16.44

12 Mo. 6.88 19.64 22.95

3 Yr CAGR 7.78 20.21 22.70

Ind Avg 32.09 24.35 19.80

S&P 500 13.71 14.43 13.15

Rating History

BUY

Volume in Millions

P/E COMPARISON

2013

2014

COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History

1 Year 2 Years 100

TTTTAAAARRRRGGGGEEEETTTTPPPPRRRRIIIICCCCEEEE$$$$99991111...7.7778888

90

80

70

60

50

40

30

25

2015

0

18.65 FL

25.80 Ind Avg

EPS ANALYSIS? ($)

21.40 S&P 500

RECOMMENDATION We rate FOOT LOCKER INC (FL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow.

HIGHLIGHTS Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 45.08% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, FL should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.

Q1 0.90 Q2 0.44

Q3 0.70 Q4 0.81 Q1 1.10 Q2 0.63 Q3 0.82 Q4 1.01 Q1 1.29

2013

2014

2015

NA = not available NM = not meaningful

1 Compustat fiscal year convention is used for all fundamental data items.

FOOT LOCKER INC has improved earnings per share by 17.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, FOOT LOCKER INC increased its bottom line by earning $3.56 versus $2.85 in the prior year. This year, the market expects an improvement in earnings ($4.02 versus $3.56).

The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Specialty Retail industry average. The net income increased by 13.6% when compared to the same quarter one year prior, going from $162.00 million to $184.00 million.

Despite its growing revenue, the company underperformed as compared with the industry average of 8.9%. Since the same quarter one year prior, revenues slightly increased by 2.6%. Growth in the company's revenue appears to have helped boost the earnings per share.

FL's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: July 19, 2015 PAGE 1

July 19, 2015

NYSE: FL

FOOT LOCKER INC

Annual Dividend Rate $1.00

Sector: Consumer Goods & Svcs Apparel Retail Source: S&P

Annual Dividend Yield Beta

1.43%

1.11

Market Capitalization $9.7 Billion

52-Week Range $47.11-$71.00

Price as of 7/16/2015 $69.93

PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN*

45%

MW

FAVORABLE

INDUSTRY ANALYSIS The specialty retail industry includes very well-known home improvement, apparel, automotive, and other narrow-focus stores such as Home Depot (HD), TJX Companies (TJX), Lowe's Companies (LOW), Gap (GPS), Bed Bath & Beyond (BBBY), Ross Stores (ROST), Limited Brands (LTD), O'Reilly Automotive (ORLY), PetSmart (PETM), Carmax (KMX), and Build-A-Bear Workshop (BBW).

The variety of product focuses targeted by specialty retail companies is very diverse. These include but are not limited to home improvement goods, pharmaceutical & beauty, shoes, electronics, and office supplies. Also included are stores narrowly focused on music, books, wine, games, rentals, vitamins, lumber, sporting goods, toys, jewelry, and fashion apparel for men, women, and teddy bears.

Revenue Growth (TTM)

UNFAVUORRABBLNE A8S%NA AEO

DSW ROST

TJX

FL

CHS GPS

LB

20%

0%

EBITDA Margin (TTM)

Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $2.3 Billion and $47.2 Billion. Companies with NA or NM values do not appear.

*EBITDA ? Earnings Before Interest, Taxes, Depreciation and Amortization.

REVENUE GROWTH AND EARNINGS YIELD

45%

MW

FAVORABLE

Some of the larger specialty retail companies also profit from the extension of credit to their customers with branded credit cards.

Companies in this industry are judged based on the metric of same-store sales, a measurement that shows if stores open for more than one year are increasing top line revenue or shrinking.

PEER GROUP: Specialty Retail

Ticker

Company Name

Recent Price ($)

FL

FOOT LOCKER INC

69.93

TJX

TJX COMPANIES INC

69.37

URBN

URBAN OUTFITTERS INC

36.10

AEO

AMERN EAGLE OUTFITTERS INC 18.31

MW

MENS WEARHOUSE INC

62.35

DSW

DSW INC

33.34

LB

L BRANDS INC

84.50

CHS

CHICOS FAS INC

16.01

ASNA

ASCENA RETAIL GROUP INC

13.87

ROST

ROSS STORES INC

52.96

GPS

GAP INC

38.09

Market Cap ($M)

9,741 47,198 4,626 3,578 3,013 2,699 24,671 2,295 2,261 21,914 15,897

Price/ Earnings

18.65 21.68 21.36 31.03

NM 18.52 22.24 42.13 22.37 22.83 13.32

The peer group comparison is based on Major Apparel Retail companies of comparable size.

Net Sales TTM ($M) 7,199.00 29,452.87 3,375.78 3,336.26 3,507.16 2,552.63 11,575.00 2,686.95 4,815.50 11,299.23 16,318.00

Net Income TTM ($M) 542.00 2,235.41 227.73 105.51 -6.50 162.03 1,135.00 57.28 102.30 963.02 1,241.00

Revenue Growth (TTM)

UNFAVORABCLEHS

-1%

ROST TJX LUBRBFDNLSW

AEO ASNA GPS 8%

0%

Earnings Yield (TTM)

Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between 0.2% and 41%. Companies with NA or NM values do not appear.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: July 19, 2015 PAGE 2

July 19, 2015

NYSE: FL

FOOT LOCKER INC

Annual Dividend Rate $1.00

Sector: Consumer Goods & Svcs Apparel Retail Source: S&P

Annual Dividend Yield Beta

1.43%

1.11

Market Capitalization $9.7 Billion

52-Week Range $47.11-$71.00

Price as of 7/16/2015 $69.93

COMPANY DESCRIPTION Foot Locker, Inc. operates as an athletic shoes and apparel retailer. The company operates in two segments, Athletic Stores and Direct-to-Customers. The Athletic Stores segment retails athletic footwear, apparel, accessories, and equipment under various formats, including Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction, and SIX:02, as well as Runners Point, and Sidestep. As of January 31, 2015, it operated 3,423 primarily mall-based stores in the United States, Canada, Europe, Australia, and New Zealand. The Direct-to-Customers segment sell athletic footwear, apparel, equipment, team licensed products, and private-label merchandise through Internet Websites, mobile sites, and catalogs. This segment operates sites for , final-, , , , , , footlocker.ca, footlocker.eu, and , as well as for , sidestep-, and . The company also provides franchise licenses to operate its Foot Locker stores in the Middle East and the Republic of Korea; and Runners Point and Sidestep stores in Germany and Switzerland. It operates 78 franchised stores. The company was founded in 1879 and is headquartered in New York, New York.

FOOT LOCKER INC 112 West 34th Street New York, NY 10120 USA Phone: 212-720-3700

STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of FL shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock's valuation. Please refer to our Valuation section on page 5 for further information.

FACTOR

SCORE

Growth

5.0 out of 5 stars

Measures the growth of both the company's income statement and

weak

cash flow. On this factor, FL has a growth score better than 90% of the

stocks we rate.

Total Return

5.0 out of 5 stars

Measures the historical price movement of the stock. The stock

weak

performance of this company has beaten 90% of the companies we

cover.

Efficiency

4.5 out of 5 stars

Measures the strength and historic growth of a company's return on

weak

invested capital. The company has generated more income per dollar of

capital than 80% of the companies we review.

Price volatility

5.0 out of 5 stars

Measures the volatility of the company's stock price historically. The

weak

stock is less volatile than 90% of the stocks we monitor.

Solvency

4.5 out of 5 stars

Measures the solvency of the company based on several ratios. The

weak

company is more solvent than 80% of the companies we analyze.

Income

3.5 out of 5 stars

Measures dividend yield and payouts to shareholders. The company's weak dividend is higher than 60% of the companies we track.

strong strong strong strong strong strong

THESTREET RATINGS RESEARCH METHODOLOGY

TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows.

Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: July 19, 2015 PAGE 3

July 19, 2015

NYSE: FL

FOOT LOCKER INC

Annual Dividend Rate $1.00

Sector: Consumer Goods & Svcs Apparel Retail Source: S&P

Annual Dividend Yield Beta

1.43%

1.11

Market Capitalization $9.7 Billion

52-Week Range $47.11-$71.00

Price as of 7/16/2015 $69.93

Consensus EPS Estimates? ($)

IBES consensus estimates are provided by Thomson Financial

FINANCIAL ANALYSIS FOOT LOCKER INC's gross profit margin for the first quarter of its fiscal year 2015 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income during the past quarter when compared with the same quarter a year ago, however, it was unable to keep up with the growth of the average competitor within its industry.

0.69 Q2 FY15

4.02 E 2016(E)

4.45 E 2017(E)

During the same period, stockholders' equity ("net worth") has remained virtually unchanged only decreasing by 1.46% from the same quarter last year.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit .

INCOME STATEMENT

Net Sales ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil)

Q1 FY15 1,916.00

325.00 290.00 184.00

Q1 FY14 1,868.00

292.00 256.00 162.00

BALANCE SHEET

Cash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil) Equity ($mil)

Q1 FY15 986.00

3,631.00 133.00

2,555.00

Q1 FY14 1,007.00 3,669.00

138.00 2,593.00

PROFITABILITY

Gross Profit Margin EBITDA Margin Operating Margin Sales Turnover Return on Assets Return on Equity

Q1 FY15 34.97% 16.96% 15.14%

1.98 14.92% 21.21%

Q1 FY14 34.58% 15.63% 13.70%

1.84 12.34% 17.47%

DEBT

Current Ratio Debt/Capital Interest Expense Interest Coverage

Q1 FY15 3.58 0.05 3.00 96.67

Q1 FY14 3.54 0.05 3.00 85.33

SHARE DATA

Shares outstanding (mil) Div / share EPS Book value / share Institutional Own % Avg Daily Volume

Q1 FY15 140 0.25 1.29

18.28 NA

1,801,077

Q1 FY14 145 0.22 1.10

17.92 NA

2,009,635

2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: July 19, 2015 PAGE 4

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