Is it time to step into Foot Locker?

But that could change. Sears insiders have made some token purchases (subscription required) of the stock following a poor quarter, but their ownership still represents a tiny chunk of Foot Locker's outstanding shares. But Goldman Sachs has a $17 target on the stock, and analyst Brad Cragin writes that "Management is proactively responding to these challenges, and we believe results will begin to stabilize in 2008 as store closures, inventory controls and efforts to differentiate stores take hold."

As I wrote recently, innovation will be the key to success in a crowded shoe retail market, and that's where Foot Locker's partnership with Nike (NYSE: NKE), House of Hoops, could come in. The stores will sell only Nike shoes and, as the name suggests, target the hardcore basketball fan who spends a lot of money on shoes. The plan is to open 50 stores over the next three years.

But the results for Foot Locker could be much bigger. From a recent MarketWatch piece on the House of Hoops deal:

"The intent is Foot Locker can learn something to apply to their stores," said Matt Powell, an analyst at research firm SportsOneSource. "This store is more about concept and consumers' experience. It's pretty interesting. Conceptually, you'll see a soccer, women's, and skateboard version of this."

There's a chance that House of Hoops could play a major role in reviving Foot Locker. And with the stock currently trading at its lowest point since 2003, it might be worth a look.