Shares of athletic footwear, apparel, and accessories retailer Foot Locker (NYSE:FL) are down 9.5% in late afternoon trading on March 2, following a note from an analyst at UBS that lowered its price target for the company's stock.
In the note lowering the price target for Foot Locker's shares from $40 to $38.50, UBS's analyst called out concerns over both the ongoing spread of coronavirus affecting traffic, and the potential for interruptions to global manufacturing supply chains.
Today's big decline comes after the company reported fourth-quarter results that came in generally ahead of investor expectations, sending shares up more than 8% on Friday. Revenue fell 2.2% in the fourth quarter, though adjusted earnings were up 4% to $1.63 per share.
Investors seemed to approve of the fourth quarter, based on Friday's positive day for the stock. But today's lowered analyst price target is a reminder that there's still plenty of reason to be pessimistic for consumer stocks -- particularly retailers like Foot Locker that not only depend on a healthy economy, but also face an ongoing challenge from the disruption of e-commerce.
Moreover, there is certainly the potential that many retailers that count on China and other countries for their supply could feel a pinch later this year. COVID-19 -- the illness caused by a novel coronavirus spreading throughout the world -- could have major economic impacts as countries take steps to stop the spread.
Foot Locker is certainly dealing with the brunt of that pessimism from investors. Shares are down almost 20% in less than one month, and have lost almost half their value over the past year.
But Foot Locker does have the makings of a solid value stock; at recent prices Foot Locker sells for less than 7.5 times last year's earnings, and the dividend yield is 4.5%. Moreover, the company's balance sheet is reasonably strong, with more than enough cash to manage its debt. Things could get worse before they get better, but it looks like the market is already pricing in a lot of bad news at this point.