When it rains, it pours, as embattled athletic apparel retailer Foot Locker (US:FL) found out on Monday. Following disappointing results for its first quarter of fiscal year 2023, FL stock ended up losing 8.54% for the May 22 session. Early trading on Tuesday shows very limited recovery, up less than 1% in the pre-market activity.

Unfortunately, Wall Street analysts see major risks ahead, leading to notable downgrades. As well, options traders smell blood in the water, flooding the derivatives market with put acquisitions.

To quickly review, Foot Locker delivered adjusted earnings per share of 70 cents, missing the Street’s consensus target for 78 cents per share. On the top line, the retailer only managed to post $1.93 billion in sales, also missing the consensus target (in this case by more than 3%). For both EPS and revenue, the respective Q1 2023 results missed against their year-ago figures.

Bears Pour In

Not waiting around for a contrarian narrative, bearish options traders flooded into the derivatives market. According to Fintel’s stock options flow screener, all transactions that occurred on May 22 had bearish implications, with all of them being put acquisitions. Most of these transactions involved multi-sweep trades, meaning that they occurred across multiple exchanges.

Moreover, the put/call ratio for FL stock now stands at 1.22. Since puts generally represent bearish wagers, a ratio above one indicates pessimism.

Analysts Act

Adding to concerns for FL stock are two analyst downgrades from Citi’s Paul Lejuez and Williams Trading analyst Sam Poser. The former expert downgraded FL to 'hold' from 'buy' on Monday, while the latter lowered his rating to 'sell' on Sunday. Previously, Poser stuck to his 'hold' call since August 2022, according to Barron’s.

Specifically, Lejuez believes stakeholders of FL stock lost confidence in the sneaker retailer's leadership team. Earlier, the company’s long-term growth strategy attracted investors. However, newly appointed CEO Mary Dillon stated during the Q1 2023 earnings call that the retailer will more aggressively mark down inventory due to slumping sales.

On the other end, Poser took issue with Foot Locker’s Lace Up strategy, a rebranding initiative that in part involves store revamps along with closures of 400 underperforming locations. Per Barron’s, Poser sees the plan as “untied or knotted up.” In addition, he lowered his price target to $25 from $38.

After the Monday close, FL stock has now lost over 30% of equity value in the trailing five sessions. For the year so far, it’s now down 25.43%.