Credit Suisse First Boston downgraded Foot Locker (Z) to neutral from outperform.
Analyst Richard Baum says he downgraded the sneaker retailer after Nike said it decided to remove Foot Locker as a primary distribution point for its elite/statement products in the U.S.
Baum says in addition to a show of brinkmanship, this is a major change in strategy and a major setback for Foot Locker, Nike's largest customer, as they rely on elite products to drive traffic into stores. Baum notes Nike historically represented as much as 50% of Foot Locker's total sales; he estimates the elite/marquee products represent 5% to 10% of total sales, with Nike representing 4% to 7% (or about 75%) of the total elite product.
Baum cut Foot Locker's $1.25 fiscal 2003 (May) earnings per share estimate to $1.15, and cut the $16 target to $9.