In a recent report, analysts at Barclays reiterated their Overweight rating on Foot Locker, Inc. FL 0.87% despite the firm’s negative overall outlook for the industry. One of the driving forces behind the bullish reiteration is Foot Locker’s recent announcement of a boost to its 2015 capital allocation plan.
The Numbers
The capital allocation announcement included a massive 66 percent increase in buyback authorization from the previous $600 million to $1 billion.
The announcement also included news of a 14 percent increase in the stock’s annual dividend, raising it to $1.00 per share in 2015. This most recent dividend boost is merely the latest in a long string of increases for Foot Locker.
Finally, the announcement included a $220 million capital expenditure program for 2015 which Barclays analysts believe will fund growth initiatives such as increased digital penetration.
Analysts Not Surprised
Barclays analysts were not caught off guard by the announcement. They note that Foot Locker’s cash as a percent of total assets is at its highest level in recent history. “With free cash flow increasing at 15% CAGR since 2010, we believe Foot Locker can comfortably achieve low-to-single-digit EPS growth from share repurchases alone,” analysts explain.
A Good Sign For Shareholders
Foot Locker’s apparent willingness to increase its share buybacks could be comforting to some shareholders that might have been getting concerned with the steep climb the stock has made lately. The stock is up more than 40 percent in the past year, but shares continued to rise more than 2.5 percent on Thursday on news of the updated capital plan.
Barclays believes there is still plenty of room to the upside for Foot Locker, as it has a $70.00 price target on the stock.
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