What Happened?
Shares of footwear and apparel retailer Foot Locker (NYSE: FL) jumped 4.1% in the afternoon session after a tame inflation report boosted investor hopes for an interest rate cut from the Federal Reserve. The latest Consumer Price Index data showed the annual inflation rate held steady at 2.7%, reassuring investors who had feared that tariffs could lead to a spike in consumer prices. This milder-than-expected reading gives the Federal Reserve more flexibility to consider lowering interest rates, possibly as soon as next month. A potential rate cut could reduce borrowing costs for consumers and businesses, stimulating more spending and providing a significant boost for the retail industry. Adding to the optimism, reports of a 90-day tariff truce with China further eased concerns about future price pressures.
After the initial pop the shares cooled down to $25.63, up 3.9% from previous close.
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What Is The Market Telling Us
Foot Locker’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 85.2% on the news that the company agreed to be acquired by DICK'S for an equity value of approximately $2.4 billion (enterprise value of $2.5 billion). The offer of $24 per share in cash or 0.1168 shares of DICK'S stock represented a substantial 66% premium over Foot Locker's average trading price for the previous 60 days.
Foot Locker is up 18.3% since the beginning of the year, but at $25.63 per share, it is still trading 22.2% below its 52-week high of $32.96 from August 2024. Investors who bought $1,000 worth of Foot Locker’s shares 5 years ago would now be looking at an investment worth $850.22.
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