NEW YORK, Nov. 20 /PRNewswire-FirstCall/ -- Foot Locker, Inc. , the New York-based specialty athletic retailer, today reported financial results for its third quarter ended November 3, 2007.
Third Quarter Results
The Company reported a net loss of $33 million, or $0.22 per share, for the third quarter this year compared with net income of $65 million, or $0.42 per share, last year. This year's results included a non-cash impairment charge to write down long-lived assets for the Company's U.S. store operations pursuant to SFAS No. 144 and expenses associated with closing unproductive stores, totaling $66 million, after tax, or $0.43 per share. Third quarter net income, before the non-cash impairment charge and the incremental expenses of closing stores, was $33 million, or $0.21 per share.
Third quarter sales decreased 5.2 percent, to $1,356 million this year compared with sales of $1,430 million for the corresponding prior year period. Third quarter comparable-store sales decreased 5.0 percent.
"Our third quarter sales were disappointing, reflecting a challenging external environment and the lack of exciting fashion trends in athletic footwear and apparel," stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. "While our sales results fell short of our expectations, third quarter markdowns were approximately 12 percent lower than last year. Additionally, we continued to focus diligently on expense management."
Year-to-Date Results
For the first nine months of the year, the Company reported a net loss of $34 million, or $0.22 per share, compared with net income of $138 million, or $0.88 per share, last year. This year's results included a non-cash impairment charge pursuant to SFAS No. 144 and expenses associated with closing unproductive stores, totaling $66 million, after tax, or $0.43 per share. Last year's results included an impairment charge pursuant to SFAS No. 144 of $12 million, after tax, or $0.08 per share. Year-to-date net income, before the non-cash impairment charges in 2006 and 2007, and the expenses of closing unproductive stores in 2007, was $32 million, or $0.21 per share this year, versus $150 million, or $0.96 per share, last year.
Year-to-date sales decreased 3.5 percent to $3,955 million compared with sales of $4,098 million last year. Comparable-store sales decreased 5.8 percent.
Financial Position
At the end of the third quarter, the Company's cash and short-term investments totaled $332 million. The Company's total cash position, net of debt, at the end of the third quarter increased by $70 million versus last year. Merchandise inventory was slightly higher at the end of the third quarter versus the comparable period of last year (less than one percent). Stated in constant currency dollars, the Company's merchandise inventory decreased by approximately three percent versus last year.
Store Base Update
Year-to-date, the Company has opened 112 new stores, and remodeled or relocated 179 stores. During the month of September, the Company opened its first store in Istanbul, Turkey. The Company also closed 158 stores during the first nine months of this year, including 13 unproductive stores during the third quarter prior to normal lease expiration. At November 3, 2007, the Company operated 3,896 stores in 21 countries in North America, Europe and Australia. In addition, 10 franchised stores are currently operating in the Middle East and South Korea.
During the fourth quarter of 2007, the Company currently expects to open eight new stores and close up to 142 unproductive stores. Approximately 53 of the stores are expected to close prior to normal lease expiration, depending on the Company's success in negotiating agreements with its landlords. The cash impact of the 2007 store closings is expected to be minimal, as the related cash costs are expected to be offset by associated inventory reductions.
The Company is hosting a live conference call at 9:00 a.m. (ET) on Wednesday, November 21, 2007 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, November 30, 2007.
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 November 3, 2007 and October 28, 2006 (In millions, except per share amounts) Third Third Quarter Quarter 2007 2006 Sales $1,356 $1,430 Cost of sales 975 1,008 Selling, general and administrative expenses 289 284 Depreciation and amortization 45 44 Impairment charge & store closing program 105 - Interest expense, net - 1 Other income - (8) 1,414 1,329 Income (loss) from continuing operations before income taxes (58) 101 Income tax expense (benefit) (24) 36 Income (loss) from continuing operations (34) 65 Discontinued operations, net of tax 1 - Net income (loss) $(33) $65 Diluted EPS: Income (loss) from continuing operations $(0.22) $0.42 Discontinued operations, net of tax - - Net income (loss) $(0.22) $0.42 Weighted-average diluted shares outstanding 153.6 156.8 Year-To-Date Year-To-Date 2007 2006 Sales $3,955 $4,098 Cost of sales 2,912 2,896 Selling, general and administrative expenses 865 840 Depreciation and amortization 132 131 Impairment charge & store closing program 105 17 Interest expense, net - 3 Other expense (income) 1 (7) 4,015 3,880 Income (loss) before income taxes and cumulative effect of accounting change (60) 218 Income tax expense (benefit) (25) 81 Income (loss) from continuing operations (35) 137 Discontinued operations, net of tax 1 - Cumulative effect of accounting change, net of tax - 1 Net income (loss) $(34) $138 Diluted EPS: Income (loss) from continuing operations $(0.22) $0.88 Discontinued operations, net of tax - - Cumulative effect of accounting change, net of tax - - Net income (loss) $(0.22) $0.88 Weighted-average diluted shares outstanding 154.1 156.8 FOOT LOCKER, INC. Condensed Consolidated Balance Sheets (unaudited) (In millions) November 3, October 28, 2007 2006 Assets CURRENT ASSETS Cash, cash equivalents and short-term investments $332 $263 Merchandise inventories 1,476 1,472 Other current assets 307 216 2,115 1,951 Property and equipment, net 547 663 Deferred tax assets 183 196 Other assets 452 464 $3,297 $3,274 Liabilities and Shareholders' Equity CURRENT LIABILITIES Accounts payable $307 $356 Accrued and other liabilities 277 252 Current portion of long-term debt and obligations under capital leases 14 - 598 608 Long-term debt and obligations under capital leases 220 235 Other liabilities 256 299 SHAREHOLDERS' EQUITY 2,223 2,132 $3,297 $3,274 FOOT LOCKER, INC. Stores and Estimated Square Footage (unaudited) (Square footage in thousands) November 3 , October 28, February 3, 2007 2006 2007 Foot Locker U.S. Number of stores 1,335 1,369 1,368 Gross square footage 5,458 5,506 5,509 Selling square footage 3,268 3,251 3,243 Footaction Number of stores 368 376 373 Gross square footage 1,714 1,760 1,744 Selling square footage 1,055 1,086 1,076 Lady Foot Locker Number of stores 543 558 557 Gross square footage 1,210 1,245 1,243 Selling square footage 687 701 700 Kids Foot Locker Number of stores 333 333 335 Gross square footage 807 807 810 Selling square footage 479 480 483 Champs Sports Number of stores 584 566 576 Gross square footage 3,173 3,100 3,138 Selling square footage 2,154 2,132 2,143 Foot Locker International Number of stores 733 733 733 Gross square footage 2,119 2,101 2,109 Selling square footage 1,091 1,093 1,095 Total Stores Operated Number of stores 3,896 3,935 3,942 Gross square footage 14,481 14,519 14,553 Selling square footage 8,734 8,743 8,740 Total Franchised Stores Number of stores 10 3 3 Gross square footage 33 9 9 Selling square footage 22 6 6
