Critical Review: Genesco (GCO) versus Foot Locker (NYSE:FL)

Genesco (NYSE: GCO) and Foot Locker (NYSE:FL) are both retail/wholesale companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, dividends, risk, profitabiliy, valuation and earnings.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Genesco and Foot Locker, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Genesco	0	3	4	0	2.57
Foot Locker	0	7	16	1	2.75

Genesco currently has a consensus target price of $45.17, indicating a potential upside of 38.97%. Foot Locker has a consensus target price of $71.99, indicating a potential upside of 43.87%. Given Foot Locker’s stronger consensus rating and higher possible upside, analysts plainly believe Foot Locker is more favorable than Genesco.

Dividends

Foot Locker pays an annual dividend of $1.24 per share and has a dividend yield of 2.5%. Genesco does not pay a dividend. Foot Locker pays out 25.4% of its earnings in the form of a dividend. Genesco has raised its dividend for 6 consecutive years.

Risk and Volatility

Genesco has a beta of 1.24, indicating that its stock price is 24% more volatile than the S&P 500. Comparatively, Foot Locker has a beta of 0.68, indicating that its stock price is 32% less volatile than the S&P 500.

Valuation & Earnings

This table compares Genesco and Foot Locker’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Genesco	$2.86 billion	0.22	$199.22 million	$4.46	7.29
Foot Locker	$7.78 billion	0.84	$1.13 billion	$4.89	10.23

Foot Locker has higher revenue and earnings than Genesco. Genesco is trading at a lower price-to-earnings ratio than Foot Locker, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Genesco and Foot Locker’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Genesco	3.07%	8.41%	4.94%
Foot Locker	8.39%	23.87%	16.90%

Institutional & Insider Ownership

94.5% of Foot Locker shares are owned by institutional investors. 3.3% of Genesco shares are owned by insiders. Comparatively, 1.7% of Foot Locker shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Foot Locker beats Genesco on 14 of the 18 factors compared between the two stocks.

Genesco Company Profile

Genesco Inc. is a retailer and wholesaler of footwear, apparel and accessories. The Company operates in five segments: Journeys Group, Schuh Group, Lids Sports Group, Johnston & Murphy Group and Licensed Brands. It relies on independent third-party manufacturers for production of its footwear products sold at wholesale. It sources footwear and accessory products from foreign manufacturers located in Bangladesh, Brazil, Cambodia, Canada, China, Dominican Republic, El Salvador, France, Germany, Hong Kong, India, Indonesia, Italy, Mexico, the Netherlands, Portugal, Peru, Romania, Taiwan and Vietnam. As of January 28, 2017, it operated 2,794 retail footwear, headwear and sports apparel and accessory stores and leased departments located primarily throughout the United States and in Puerto Rico, including 147 headwear and sports apparel and accessory stores and 87 footwear stores in Canada and 128 footwear stores in the United Kingdom, the Republic of Ireland and Germany.

Foot Locker Company Profile

Foot Locker, Inc. is a retailer of shoes and apparel. The Company operates through two segments: Athletic Stores and Direct-to-Customers. The Company is an athletic footwear and apparel retailer, which include businesses, such as include Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction, Runners Point, Sidestep and SIX:02. The Direct-to-Customers segment is multi-branded and sells directly to customers through Internet and mobile sites and catalogs. The Direct-to-Customers segment operates the Websites for eastbay.com, final-score.com, eastbayteamsales.com and sp24.com. Additionally, this segment includes the Websites, both desktop and mobile, aligned with the brand names of its store banners (footlocker.com, ladyfootlocker.com, six02.com kidsfootlocker.com, champssports.com, footaction.com, footlocker.ca, footlocker.eu, runnerspoint.com and sidestep-shoes.com).