Foot Locker (FL), a popular footwear retailer, is facing potential challenges that could have a negative impact on the company's stock, according to analysts at Goldman Sachs. Led by Kate McShane, the analyst team has downgraded their recommendation on Foot Locker to Sell from Neutral and set a price target of $18. As a result, shares of Foot Locker were falling by 0.5% to $21.84.

Goldman Sachs cited several factors for their downgrade. Firstly, Foot Locker's Champs Sports brand is undergoing a transformation that involves shutting down underperforming stores and focusing on key markets. However, this transition may result in some loss of existing customers as the company shifts its focus and reduces its store footprint.

Secondly, Foot Locker is receiving less desirable products from Nike (NKE), which could impact its market share. The company stated in February 2022 that Nike was prioritizing its direct-to-consumer strategy, leading to a decline in the concentration of Nike products available through Foot Locker. While Nike items are still available, they are not the most sought-after products, unlike other retailers such as Deckers.

Lastly, Foot Locker's stock valuation may face pressure due to weak demand and high promotions as the company deals with a significant inventory backlog.

This has been a challenging year for Foot Locker, with shares experiencing a 42% decline. In August, the company reported sales figures that fell short of expectations but met earnings forecasts. According to FactSet, the majority of analysts have taken a neutral stance on the stock, with 68% rating it as Neutral, 18% as Buy, and 14% as Sell.

The outlook for Foot Locker is uncertain as it navigates these challenges. Time will tell if the company can overcome them and return to growth.

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