Short-Term Bearish Options Traders Flock to Foot Locker Stock

Short-term options traders have been put biased of late

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Foot Locker, Inc. (NYSE: FL) is an American retailer most known for selling sneakers. The company provides sportswear and footwear products through various brands including Foot Locker, Kids Foot Locker, Champs Sports, Eastbay, atmos, WSS, and Sidestep. It also operates approximately 2,800 retail stores in 28 countries across North America, Europe, Asia, Australia, and New Zealand. At last glance, FL is trading up 1.2% at $32.22.

Regarding the stock, FL is down by about 33% year-over-year and has decreased by 46% since peaking at a 52-week high of $57.76. Additionally, it has dropped by 26% year-to-date, experiencing a 14% decline over the past month. Moreover, the stock offers a very attractive valuation at a forward price-earnings ratio of 7.15 and a price-sales ratio of 0.35. It also provides an incredible dividend yield of 5.14% at a forward dividend $1.60.

However, the biggest issue with Foot Locker is its fundamentals. To begin with, the company holds $3.29 billion in total debt, which is nearly $400 million more than its market cap of $2.9 billion, and just $386 million in cash on its balance sheet. Furthermore, the business has been inconsistent with its growth over the years and is expected to continue struggling throughout the rest of the year and going into the next year.

Regardless, Foot Locker stock has attracted bearish short-term options traders, who have been incredibly put-biased of late. This is per the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.26, which sits in the 88th percentile of its annual range. 

Short interest has been moving higher again, up 12.3% during the most recent reporting period. This accounts for over 9% of the stock's total available float, or three days' worth of pent-up buying power.

Estimates predict Foot Locker will end fiscal 2023 with a 6.7% decline in revenue and a 43.8% drop in earnings. They also estimate that the business will see a 2.8% decrease in revenue and a 4.6% decrease in earnings for fiscal 2024, making the stock’s cheap price tag and high dividend yield much less appealing for risk-averse investors. Still, Foot Locker represents an intriguing option for long-term investors as both a potential recovery play and a passive income opportunity.


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