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Foot Locker vs. Big 5 Sporting Goods: Which Retail Stock is a Better Buy?

Many investors are starting to get interested in retail stocks due to the economy reopening which should lead to pent-up demand for in-person shopping. Patrick Ryan breaks down which retail stocks has more upside: Foot Locker (FL) or Big Five Sporting Goods (BGFV)?

Now that nearly a dozen states are reopening, it is time to shift our attention to traditional brick-and-mortar retail stocks. People will be out and about, shopping in-person, socializing, and living life as it used to be, meaning brick-and-mortar stores will rebound.

Though some newly developed consumer habits such as strictly shopping online have been ingrained during the pandemic, a significant number of people still look forward to shopping at stores in-person. This means retail is poised for an epic comeback in the months ahead.

Let’s take a look at two of the most intriguing conventional retail stocks that have the potential to soar with the economy’s reopening: Foot Locker (FL) and Big 5 Sporting Goods (BGFV).

Foot Locker (FL)

Though FL partially pivoted to the web across the past year, the company’s bread and butter are its brick-and-mortar stores, most of which are sized just right, aesthetically pleasing, and provide competitive prices. All in all, FL has more than 3,000 stores across more than two dozen countries, spanning an impressive five continents. FL even has franchises in the Middle East.

Just about everyone who shops at FL stores is pleased with the experience. However, FL also has a well-designed website and mobile apps that facilitate shopping. FL is in the catbird seat now that people have packed on the pounds while quarantining. The masses will emerge from their homes, looking to shed pounds and get back into shape with the help of FL’s footwear and other fitness-oriented products.

FL According to the POWR Ratings and the Analysts

FL has B grades in the Quality and Value components of the POWR Ratings. If you are curious as to how FL fares in the Momentum, Sentiment, and Stability components, you can find out by clicking here.

Of the 33 stocks in the Athletics & Recreation industry, FL is ranked 17th. You can learn more about this industry by clicking here.

The analysts are uber-bullish on FL, setting an average price target of $54.21, meaning the stock has nearly 5% upside. The highest analyst price target of the stock is $75. FL currently has a forward P/E ratio of a mere 11.14, indicating it is underpriced. Though FL is not a tech stock, a forward P/E ratio below 12 has inherent appeal.

Chinks in FL's Armor

FL's most recent earnings proved a bit disappointing. Though FL had strong growth in Q3, sales dipped in the fourth quarter, dropping nearly 3%. FL's overall revenue slid slightly more than 1% to $2.19 billion. The Wall Street analysts predicted FL would rake in $2.29 billion of revenue. However, once the 10% of FL stores that have closed as a result of coronavirus restrictions reopen, FL will hit its stride once again.

Big 5 Sporting Goods (BGFV)

Based in beautiful El Segundo, California, BGFV is quickly becoming a household name throughout the United States. BGFV sells athletic sneakers, athletic apparel, fitness equipment, accessories, hunting supplies, camping items, and plenty more. In short, if you are an outdoor enthusiast or physically fit, you will gravitate toward BGFV stores, assuming there is one in your area.

Check out the BGFV POWR Ratings and you will be impressed. BGFV has an overall POWR Rating of A, meaning it is a Strong Buy. BGFV has A grades in the Growth, Quality, Momentum, and Value components of the POWR Ratings. Investors who would like to learn more about how BGFV fares in terms of the Sentiment and Stability components can find out by clicking here.

Of the 33 stocks in the Athletics & Recreation category, BGFV is ranked first. You can learn more about the Athletics & Recreation industry's stocks by clicking here.

Where Does BGFV Head From Here?

The analysts are bullish on BGFV, setting a price target of $16, indicating it has nearly 9% upside potential. This upside potential is higher than nearly 60% of all stocks categorized as consumer cyclicals. If you still aren’t convinced BGFV is worthy of your investing dollars, look no further than its dividend of nearly 3%.

The Better Buy

BGFV is the better buy. Though FL certainly has its merits, BGFV’s comparably diverse product offerings provide a significant competitive advantage. While FL is primarily dependent on the sale of sneakers, many of which are overpriced, BGFV sells a few everything sports and outdoor-related. Add in the fact that BGFV is a POWR Ratings stud and you have even more reason to consider adding it to your portfolio.

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FL shares were trading at $50.26 per share on Thursday afternoon, down $1.08 (-2.10%). Year-to-date, FL has gained 24.69%, versus a 1.79% rise in the benchmark S&P 500 index during the same period.



About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.

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