CS First Boston Lowers Foot Locker to 'Neutral'

Analyst Richard Baum says Nike will curb sales of its elite products to the sneaker retailer -- a major setback

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.

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