12:03 PM EST, 03/07/2024 (MT Newswires) -- Foot Locker's ( FL ) "disappointing" full-year guidance and prolonged long-term profitability target trajectory have cast a shadow over a "decent" Q4, Morgan Stanley said in a note emailed on Thursday.

The analysts said 2024 has been positioned as an "investment year," with initial 2024 guidance falling short of expectations on higher selling, general and administrative expenses. "It is not entirely de-risked, in our view," according to the note.

Beating low expectations for Q4, the company ended a challenging year, Morgan Stanley said, with positive points including revenue outperformance and inventory management. However, gross margin fell short of expectations and the upside in EPS was largely attributed to add-backs, the analysts said.

Foot Locker's ( FL ) Q4 showed bright spots in revenue outperformance on better-than-expected comparisons, but these positives were offset by a cost, with the company's gross margin falling short of Wall Street forecasts, the analysts said. "[W]e caution [Foot Locker's ( FL )] better 4Q topline outcome may be mostly a function of higher promotional/discounting activity, & thus difficult to sustain," the note added.

Morgan Stanley kept its equal-weight rating on the stock, while adjusting its price target to $26 from $28.

Shares of Foot Locker ( FL ) were up more than 1% in recent Thursday trading.

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