NEW YORK, Aug. 20 /PRNewswire-FirstCall/ -- Foot Locker, Inc. , the New York-based specialty athletic retailer, today reported financial results for its second quarter ended August 1, 2009.
Second Quarter Results
The Company reported a break-even earnings performance for the second quarter ended August 1, 2009 compared with net income of $18 million, or $0.11 per share, last year. Second quarter sales decreased 15.6 percent, to $1,099 million this year compared with sales of $1,302 million for the corresponding prior year period. Excluding the effect of foreign currency fluctuations, total sales for the second quarter decreased 11.8 percent. Comparable-store sales decreased 12.1 percent.
"The impact of lower than anticipated sales in our U.S. businesses on our second quarter earnings were mitigated by the aggressive actions we took to control expenses and inventories," stated Matthew D. Serra, Foot Locker, Inc.'s Chairman of the Board. "We successfully offset some of the impact of our sales shortfall by reducing our selling, general and administrative expenses, negotiating favorable occupancy costs and benefiting from lower depreciation expense. Additionally, we benefited during the quarter from our improved inventory position, as our total markdown activity was favorable to last year."
Year-to-Date Results
Net income for the Company's first six months of the year was $31 million, or $0.20 per share, compared with net income of $21 million, or $0.13 per share, for the corresponding period last year. Last year's results included store closing expenses and a non-cash impairment charge totaling $18 million, after tax, or $0.12 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.
Year-to-date sales decreased 11.3 percent, to $2,315 million compared with sales of $2,611 million last year. Excluding the effect of foreign currency fluctuations, total sales year-to-date decreased 7.0 percent. Comparable-store sales decreased 7.3 percent.
Financial Position
At August 1, 2009, the Company's cash and short-term investments totaled $415 million while the debt on its balance sheet was $138 million. The Company's cash position, net of debt, was $29 million lower than the same time last year, reflecting the cash purchase of CCS for $106 million during the third quarter of last year.
The Company's merchandise inventory at the end of the second quarter was 8.4 percent lower than at the end of the second quarter last year. On a constant currency basis, merchandise inventory was 6.1 percent below last year.
Store Base Update
During the first six months of the year, the Company opened 26 new stores, remodeled/relocated 89 stores and closed 52 stores. At August 1, 2009, the Company operated 3,615 stores in 21 countries in North America, Europe and Australia. In addition, 19 franchised stores were operating in the Middle East and South Korea.
Mr. Serra continued, "While our financial results for the second quarter were affected by the macro external environment, we emerged from the period with a strong cash balance and improved merchandise inventory position. Until we see enduring signs of a pick-up in overall consumer spending, we plan to continue to control the key controllables of our business, with an objective of reducing our operating expenses and optimizing inventory management. Additionally, a strong commitment to maintaining our strong financial position and generating positive cash flow will remain a high priority."
The Company is hosting a live conference call at 9:00 a.m. (ET) on Friday, August 21, 2009 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 28, 2009.
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), pandemics and similar major health concerns, unseasonable weather, further deterioration of global financial markets, economic conditions worldwide, further deterioration of business and economic conditions, 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, and 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 1, 2009 and August 2, 2008 (In millions, except per share amounts) Second Second Quarter Quarter 2009 2008 ------- ------- Sales $1,099 $1,302 Cost of sales 819 941 Selling, general and administrative expenses 252 299 Depreciation and amortization 28 33 Store closing costs --- 1 Interest expense, net 3 2 Other (income) (1) (2) 1,101 1,274 Income (loss) from continuing operations before income taxes (2) 28 Income tax expense (benefit) (1) 10 Income (loss) from continuing operations (1) 18 Discontinued operations, net of tax 1 --- Net Income $--- $18 Diluted EPS: Income from continuing operations $--- $0.11 Discontinued operations, net of tax Net Income --- --- $--- $0.11 Weighted-average diluted shares outstanding 155.9 155.4 Year-To-Date Year-To-Date 2009 2008 ------------ ------------ Sales $2,315 $2,611 Cost of sales 1,679 1,884 Selling, general and administrative expenses 530 598 Depreciation and amortization 56 65 Impairment charge --- 15 Store closing costs --- 5 Interest expense, net 5 3 Other (income) (2) (2) 2,268 2,568 Income from continuing operations before income taxes 47 43 Income tax expense 17 22 Income from continuing operations 30 21 Discontinued operations, net of tax 1 --- Net Income $31 $21 Diluted EPS: Income from continuing operations $0.20 $0.13 Discontinued operations, net of tax --- --- Net Income $0.20 $0.13 Weighted-average diluted shares outstanding 155.8 155.2 Reconciliation of Net Income from a GAAP-reported basis to a non-GAAP basis (unaudited) (In millions, except per share amounts) Year-To-Date Year-To-Date 2009 2008 ------------ ------------ Net income: GAAP basis $31 $21 Additions, after tax: Impairment charge (1) --- 15 Store closing program costs (2) --- 3 Non-GAAP adjusted basis $31 $39 Net income per share: GAAP basis $0.20 $0.13 Additions, after tax: Impairment charge --- 0.10 Store closing program costs --- 0.02 Non-GAAP adjusted basis $0.20 $0.25 (1) 2008 amount reflects the write down of the value of a note receivable from the purchaser of the Company's former Northern Group Operation in Canada. (2) 2008 amount reflects the costs of closing underproductive stores. FOOT LOCKER, INC. Condensed Consolidated Balance Sheets (unaudited) (In millions) August 1, August 2, 2009 2008 --------- --------- Assets CURRENT ASSETS Cash, cash equivalents and short-term investments $415 $431 Merchandise inventories 1,284 1,401 Other current assets 211 248 1,910 2,080 Property and equipment, net 433 529 Deferred tax assets 366 243 Other assets 306 413 $3,015 $3,265 Liabilities and Shareholders' Equity CURRENT LIABILITIES Accounts payable $322 $363 Accrued and other liabilities 191 266 513 629 Long-term debt and obligations under capital leases 138 125 Other liabilities 387 252 SHAREHOLDERS' EQUITY 1,977 2,259 $3,015 $3,265 FOOT LOCKER, INC. Store and Estimated Square Footage (unaudited) (Square footage in thousands) August 1, August 2, January 31, 2009 2008 2009 --------- --------- ----------- Foot Locker U.S. Number of stores 1,211 1,245 1,218 Gross square footage 4,898 5,074 4,953 Selling square footage 2,901 3,030 2,946 Footaction Number of stores 327 343 335 Gross square footage 1,522 1,600 1,568 Selling square footage 951 993 974 Lady Foot Locker Number of stores 469 518 486 Gross square footage 1,034 1,148 1,077 Selling square footage 592 654 615 Kids Foot Locker Number of stores 304 312 305 Gross square footage 724 756 734 Selling square footage 425 448 434 Champs Sports Number of stores 565 573 565 Gross square footage 3,018 3,096 3,034 Selling square footage 2,005 2,081 2,032 CCS Number of stores 2 --- --- Gross square footage 6 --- --- Selling square footage 4 --- --- Foot Locker International Number of stores 737 737 732 Gross square footage 2,145 2,147 2,135 Selling square footage 1,093 1,097 1,091 Total Stores Operated Number of stores 3,615 3,728 3,641 Gross square footage 13,347 13,821 13,501 Selling square footage 7,971 8,303 8,092 Total Franchised Stores Number of stores 19 14 17 Gross square footage 80 54 62 Selling square footage 53 36 42
Foot Locker, Inc.
CONTACT: Peter D. Brown, Senior Vice President, Chief Information
Officer and Investor Relations of Foot Locker, Inc., +1-212-720-4254
Web Site: http://www.footlocker-inc.com/
