- Second Quarter Net Income is $0.11 Per Share
- Second Quarter Sales Increased 1.5 Percent
- Cash Position, Net of Debt, Increased $173 Million
NEW YORK, Aug. 21 /PRNewswire-FirstCall/ -- Foot Locker, Inc. (NYSE: FL),
the New York-based specialty athletic retailer, today reported financial
results for its second quarter ended August 2, 2008.
Second Quarter Results
The Company reported net income of $18 million, or $0.11 per share, for
the second quarter ended August 2, 2008 compared with a net loss of
$18 million, or $0.12 per share, last year. Second quarter sales increased
1.5 percent, to $1,302 million this year compared with sales of $1,283 million
for the corresponding prior year period. Second quarter comparable-store
sales decreased 0.5 percent.
'Our second quarter earnings were at the high end of our expectations due
primarily to lower than anticipated markdowns. As a result, our gross margin
rate was 420 basis points favorable to the second quarter of last year and in
line with our historic gross margin rates for the second fiscal quarter,'
stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive
Officer. 'Our gross margin rate in the second quarter of last year was
affected negatively by a strategic decision to accelerate the clearance of
slow-selling merchandise.'
Year-to-Date Results
Net income for the Company's first six months of the year was $21 million,
or $0.13 per share, and includes store closing expenses of $3 million,
after-tax, or $0.02 per share, and a non-cash impairment charge of
$15 million, after-tax, or $0.10 per share. For comparison purposes,
year-to-date net income in 2008, before the store closing expenses and
impairment charge, was $39 million, or $0.25 per share. For the first six
months of 2007, the Company had a net loss of $1 million, or $0.01 per share.
Year-to-date sales increased 0.5 percent to $2,611 million compared with
sales of $2,599 million last year. Comparable-store sales decreased
1.7 percent.
Financial Position
At August 2, 2008, the Company's cash and short-term investments totaled
$431 million while the debt on its balance sheet was $125 million. The
Company's cash position, net of debt, was $173 million higher than the same
time last year. During the second quarter the Company repaid the remaining
$88 million of its bank term debt in advance of final maturity.
In line with a strategic initiative designed to improve inventory
management, the Company's merchandise inventory at the end of the second
quarter was 3.5 percent lower than at the end of the second quarter last year.
On a constant currency basis, merchandise inventory was 5.4 percent below last
year. At the Company's combined U.S. store businesses, merchandise inventory
has been reduced by approximately 10 percent versus the level two years ago.
Store Base Update
During the first six months of the year, the Company opened 40 new stores,
remodeled/relocated 162 stores and closed 97 stores. At August 2, 2008, the
Company operated 3,728 stores in 21 countries in North America, Europe and
Australia. In addition, 14 franchised stores were operating in the Middle
East and South Korea.
Mr. Serra continued, 'While we are encouraged with our financial results
for the second quarter and first half of this year, we are being cautious in
how we manage our business for the balance of the year given the uncertain
economic environment in which we operate, particularly as it relates to
consumer spending. We currently expect our net income for the full year,
excluding the $0.10 per share impairment charge recorded during our first
fiscal quarter, to be in a range of $0.70 to $0.85 per share.'
The Company is hosting a live conference call at 9:00 a.m. (ET) on Friday,
August 22, 2008 to discuss these results. This conference call may be
accessed live from the Investor Relations section of the Foot Locker, Inc.
website at http://www.footlocker-inc.com. The conference call will be
available for webcast replay until 5:00 p.m. on Friday, August 29, 2008.
Disclosure Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning
of the federal securities laws. All statements, other than statements of
historical facts, which address activities, events or developments that the
Company expects or anticipates will or may occur in the future, including, but
not limited to, such things as future capital expenditures, expansion,
strategic plans, dividend payments, stock repurchases, growth of the Company's
business and operations, including future cash flows, revenues and earnings,
and other such matters are forward-looking statements. These forward-looking
statements are based on many assumptions and factors detailed in the Company's
filings with the Securities and Exchange Commission, including the effects of
currency fluctuations, customer demand, fashion trends, competitive market
forces, uncertainties related to the effect of competitive products and
pricing, customer acceptance of the Company's merchandise mix and retail
locations, the Company's reliance on a few key vendors for a majority of its
merchandise purchases (including a significant portion from one key vendor),
unseasonable weather, economic conditions worldwide, any changes in business,
political and economic conditions due to the threat of future terrorist
activities in the United States or in other parts of the world and related
U.S. military action overseas, the ability of the Company to execute its
business plans effectively with regard to each of its business units, risks
associated with foreign global sourcing, including political instability,
changes in import regulations, and disruptions to transportation services and
distribution. Any changes in such assumptions or factors could produce
significantly different results. The Company undertakes no obligation to
update forward-looking statements, whether as a result of new information,
future events, or otherwise.
FOOT LOCKER, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Periods ended August 2, 2008 and August 4, 2007
(In millions, except per share amounts)
Second Second
Quarter Quarter
2008 2007
Sales $1,302 $1,283
Cost of sales 941 981
Selling, general and administrative expenses 299 286
Depreciation and amortization 33 44
Store closing costs 1 --
Interest expense, net 2 --
Other (income) expense (2) 1
1,274 1,312
Income (loss) before income taxes 28 (29)
Income tax expense (benefit) 10 (11)
Net income (loss) $18 $(18)
Diluted EPS:
Net income (loss) $0.11 $(0.12)
Weighted-average diluted shares outstanding 155.4 154.0
Year-To-Date Year-To-Date
2008 2007
Sales $2,611 $2,599
Cost of sales 1,884 1,937
Selling, general and administrative expenses 598 576
Depreciation and amortization 65 87
Impairment charge 15 --
Store closing costs 5 --
Interest expense, net 3 --
Other (income) expense (2) 1
2,568 2,601
Income (loss) before income taxes 43 (2)
Income tax expense (benefit) 22 (1)
Net income (loss) $21 $(1)
Diluted EPS:
Net income (loss) $0.13 $(0.01)
Weighted-average diluted shares outstanding 155.2 154.4
Reconciliation of Net Income from a GAAP-reported basis to a non-GAAP basis
(unaudited)
Periods ended August 2, 2008 and August 4, 2007
(In millions, except per share amounts)
Second Second
Quarter Quarter
2008 2007
Net income - GAAP basis $18 $(18)
Additions:
Impairment charge --- ---
Store closing costs --- ---
Net income - non-GAAP basis $18 $(18)
Net income per share - GAAP basis $0.11 $(0.12)
Additions:
Impairment charge --- ---
Store closing costs --- ---
Net income per share - non-GAAP basis $0.11 $(0.12)
Year-To-Date Year-To-Date
2008 2007
Net income - GAAP basis $21 $(1)
Additions:
Impairment charge 15 ---
Store closing costs 3 ---
Net income - non-GAAP basis $39 $(1)
Net income per share - GAAP basis $0.13 $(0.01)
Additions:
Impairment charge 0.10 ---
Store closing costs 0.02 ---
Net income per share - non-GAAP basis $0.25 $(0.01)
FOOT LOCKER, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(In millions)
August 2, August 4,
2008 2007
Assets
CURRENT ASSETS
Cash, cash equivalents and
short-term investments $431 $363
Merchandise inventories 1,401 1,452
Other current assets 250 290
2,082 2,105
Property and equipment, net 529 648
Deferred tax assets 247 134
Other assets 413 453
3,271 $3,340
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable $363 $368
Accrued and other liabilities 266 254
Current portion of long-term debt and
obligations under capital leases -- 14
629 636
Long-term debt and obligations
under capital leases 125 216
Other liabilities 257 245
SHAREHOLDERS' EQUITY 2,260 2,243
$3,271 $3,340
FOOT LOCKER, INC.
Store and Estimated Square Footage
(unaudited)
(Square footage in thousands)
August 2, August 4, July 29,
2008 2007 2006
Foot Locker U.S.
Number of stores 1,245 1,321 1,363
Gross square footage 5,074 5,344 5,501
Selling square footage 3,030 3,162 3,241
Footaction
Number of stores 343 373 365
Gross square footage 1,600 1,735 1,721
Selling square footage 993 1,066 1,063
Lady Foot Locker
Number of stores 518 546 550
Gross square footage 1,148 1,217 1,229
Selling square footage 654 689 693
Kids Foot Locker
Number of stores 312 331 325
Gross square footage 756 801 789
Selling square footage 448 476 470
Champs Sports
Number of stores 573 575 559
Gross square footage 3,096 3,127 3,063
Selling square footage 2,081 2,123 2,105
Footquarters
Number of stores -- 32 --
Gross square footage -- 188 --
Selling square footage -- 169 --
Foot Locker International
Number of stores 737 727 732
Gross square footage 2,147 2,108 2,099
Selling square footage 1,097 1,080 1,093
Total Stores Operated
Number of stores 3,728 3,905 3,894
Gross square footage 13,821 14,520 14,402
Selling square footage 8,303 8,765 8,665
Total Franchised Stores
Number of stores 14 7 --
Gross square footage 54 20 --
Selling square footage 36 14 --
SOURCE Foot Locker, Inc.
