Canaccord Genuity has upped its price target on Foot Locker (NYSE:FL) ahead of the retailer's results on Friday.
The change from a price target of US$72 to US$78 comes despite the broker being a couple of cents below market consensus with its forecast of second quarter earnings of 67 cents.
The broker concedes the athletic footwear seller could surprise to the upside as the retailer executes on its initiatives to boost productivity gains across its e-commerce platforms and upgrades parts of its retail estate.
The broker expects Foot Locker will continue to drive EBIT (underlying earnings) margin expansion while also returning cash to shareholders via buy-backs and dividends.
"Despite stiff FX [foreign exchange] head-winds not expected to have abated in Q2 (approx. -5c EPS [earnings per share] impact in Q1), we believe comparative trends were robust as basketball likely led the sales gains powered by Jordan retros, LeBron, Kyrie, UA's Curry One, and an improvement in adidas," Camilo Lyon and Pallav Saini said in a research note.
"In addition, we believe casual running styles like the Nike Roshe and Hurache added to comp gains, while signs of a revival in performance running are also emerging (Air Max '15 and Pegasus)," they added.
The broker sees plenty of room to grow domestically, with the women's and kid's sectors relatively under-served, Canaccord reiterated its 'buy' recommendation.
Shares in Foot Locker were up 0.5% at US$73.57 in late morning trading.