Retailers have had a tough year in general. But footwear retailers have managed to perform well as consumers have slowly begun to loosen their purse strings. Foot Locker (NYSE: FL) certainly falls into this category. In its most recent quarter, the New York-based retailer saw its profits sextuple, helped by higher sales.

Let's take a closer look at whether Foot Locker deserves a place in your portfolio.  

What lies ahead?
In the past 12 months, revenues have gone up 10% to $5.4 billion from $4.91 billion, while the operating margin has risen from 3% to 7%. Given its strong performance, higher shoe sales, and the recent opening of 35 new stores, the future seems sunny. But as economic conditions remain uncertain, Foot Locker may find it difficult to continue boosting sales. Chief Executive Ken Hicks recently expressed concern regarding holiday-season sales, and the company may have to resort to discounts, and therefore absorb lower revenue and margins, to help clear out its shelves.    

Another concern is that Foot Locker sells basketball shoes, NBA jerseys, and other related merchandise. The company worries that the ongoing NBA lockout could affect sales in these areas.

What's the price?

Company

Trailing P/E

Forward P/E

TEV/FCF

Foot Locker 12.5 10 12.7
Dick's Sporting Goods (NYSE: DKS) 18.6 14.3 19.3
Genesco (NYSE: GCO) 19.7 12.9 57.3
Collective Brands (NYSE: PSS) 27.8 10 22.4

Source: Yahoo! Finance.

Foot Locker has the lowest P/E among its peers on the list. The TEV/FCF ratios also suggest that Foot Locker is a comparable bargain.

But although Foot Locker's valuation may seem attractive, given the uncertain economic conditions, I'm a little reluctant to invest in reatil companies at the moment. I would rather wait for economic conditions to improve. So in the short run, it's best to wait and watch.

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