Goldman Sachs analysts Taposh Bari and Chad Sutherland have a new research note out explaining how to invest in the U.S. footwear cycle.
One of their favorite stocks in the shoe industry is Foot Locker (FL) which they rate as 'Buy' with a $39 price target.
And a big part of their investment thesis is the comeback of the basketball shoe business.
"Basketball, in particular, appears to be a resurging athletic trend that should extend the cyclically robust same-store sales growth at FL and, to a lesser extent, FINL," they write.
They see three reasons for this:
- NBA Ratings: "Renewed interest in the league presumably stems from LeBron James' joining the Miami Heat and the "super-team trend that has ensued."
- Fashion Trends: "We view basketball's hightop silhouette as the male version of a bootie or short boot. The skinny denim silhouette, adopted by women in 2008/2009 and men more recently, creates a more tapered leg opening and accommodates a taller footwear silhouette (like basketball shoes)."
- Vendor Innovation: Retro Jordan sneakers are launching more frequently and non-Nike brands are becoming more successful at selling products above the $100 price point.
The offer some charts to support this:
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