Whilst Q4 was better than expected, Foot Locker share price reacted negatively to FY26 EBIT target moving to FY28 Foot Locker reported a better-than-expected Q4 to the end of February, which is 1 month more trading than JD Sports last reported. Foot Locker’s Q4 comp sales decreased 0.7% (Q4 guidance: down -7% to -9%; Q3 down -8%), driven by a 210 bps impact from repositioning the Champs Sports banner (Q4 comps -10.4% : Q3 -20%), consumer softness, and changing vendor mix. Management put the better performance down to its transformation strategy gaining traction. Of particular interest from a JD perspective is North America, where Foot Locker & Kids Foot Locker banner comp sales grew 5.2% (Q3 -4.9%). Whilst the timeframe is not directly comparable, JD Sports last talked about high single digit US organic growth when it warned in January. We have already heard from JD and others that December was particularly promotional, with NIKE promoting across the board. Foot Locker’s gross margin was down -350bps primarily due to promotional activity. On the call, the CFO commented that he believed there is no structural reason why it cannot recoup gross margin back over time. Foor Locker’s inventory levels were down 8.2% at the end of Q4 (down 7.8% ex FX fluctuations), though management gave the impression there is more to go after. Foot Locker management expects 2024 to be another year of investment and a return to growth with Nike (non-Nike brand sales now 40% of total). EPS guidance of $1.5-$1.7 (FY23 $1.3) implies EPS growth of 15%-30% with sales -1% to +1% (incl 1% headwind from 53rd week), comp sales up 1-3% (space down 1%) and recovery in gross margin to 29.8%-30.0% (FY23 27.7%). Foot Locker’s share price (off c.29%) reacted negatively to the news its longer term 8.5% to 9% Lace Up EBIT margin target (FY23 1.7%), set at March 2023’s CMD, has been pushed out to FY28 from FY26, citing its lower starting point as it exits 2023. Next news from JD – Delayed FY25 guidance due at the end of March JD’s management is due to give FY25 guidance at the end of March (FactSet consensus FY25 PBT £980m) and report FY24 results at some point in May. Post JD’s January profit warning, and given challenging 1H comps, we do not see March’s update as a trigger for a re-rating of its shares given short term demand concerns over the US and UK consumer are likely to persist until the Autumn at the earliest in our view. Valuation (CY25E PE 9x) is undemanding given JD’s longer term growth opportunities.