NEW YORK, Aug. 18, 2017 /PRNewswire/ -- Foot Locker,
Inc. (NYSE: FL), the New
York-based specialty athletic retailer, reported today
financial results for its second quarter ended July 29, 2017.
Second Quarter Results
Net income for the Company's
second quarter ended July 29, 2017
was $51 million, or $0.39 per share, compared with net income of
$127 million, or $0.94 per share in the same period of 2016.
This result included a $50 million
pre-tax litigation charge related to a recent appeals court
decision in a lawsuit against the Company involving the conversion
of its pension plan in 1996. The Company previously recorded
a $100 million pre-tax charge in the
third quarter of 2015 related to the same litigation.
Excluding this charge, which reduced after-tax earnings by
23 cents per share, non-GAAP earnings
were $0.62 per share.
Second quarter comparable-store sales decreased 6.0
percent. Total sales decreased 4.4 percent, to $1,701 million this quarter, compared with sales
of $1,780 million for the
corresponding prior-year period. Excluding the effect of
foreign currency fluctuations, total sales for the second quarter
decreased 4.3 percent. The Company's gross margin rate
decreased to 29.6 percent of sales from 33.0 percent a year ago,
and the selling, general, and administrative expense rate increased
20 basis points to 19.9 percent of sales.
"While we believe our position in the market for premium
sneakers remains very strong and our customers continue to look to
us for compelling new athletic footwear and apparel styles," said
Richard Johnson, Chairman and Chief
Executive Officer, "sales of some recent top styles fell well short
of our expectations and impacted this quarter's results. At the
same time, we were affected by the limited availability of
innovative new products in the market. We believe these
industry dynamics will persist through 2017, and we expect
comparable sales to be down three to four percent over the
remainder of the year."
Mr. Johnson continued, "We are obviously disappointed in the
results for the quarter, and our team is working quickly to adjust
our operations to a changed retail landscape in which we are seeing
our consumers move faster than ever from one source of inspiration
or influence to another. In addition to working with our
vendor partners to identify and capture new trends faster, we are
also evaluating a realignment of our capital expenditure priorities
and additional expense reductions so we can regain our momentum on
both the top and bottom lines and deliver long-term value for our
shareholders."
Year-To-Date Results
Net income for the Company's
first six months of the year decreased to $231 million, or $1.74 per share on a GAAP basis, compared to net
income of $318 million, or
$2.33 per share, for the
corresponding period in 2016. On a non-GAAP basis, earnings
per share for the six-month period totaled $1.97, a 15 percent decrease compared to the same
period in 2016. Year-to-date sales were $3,702 million, a decrease of 1.7 percent
compared to sales of $3,767 million
in the corresponding six-month period of 2016. Year-to-date,
comparable store sales decreased 2.6 percent, while total
year-to-date sales, excluding the effect of foreign currency
fluctuations, decreased by 1.1 percent.
Financial Position
At July 29,
2017, the Company's merchandise inventories were
$1,290 million, 3.7 percent lower
than at the end of the second quarter last year. Using
constant currencies, inventory decreased 4.9 percent. The
Company's cash totaled $1,043
million, while the debt on its balance sheet was
$126 million. The Company spent
$21 million to repurchase 350
thousand shares during the quarter and paid a quarterly dividend of
$0.31 per share for $41 million.
"In addition to retaining our very strong overall financial
position, we took aggressive action in the second quarter to ensure
that our inventory levels remained in line with sales," said
Lauren Peters, Executive Vice
President and Chief Financial Officer. "In light of the
current sales challenges in this unprecedented retail environment,
we are considering a range of expense alternatives, including
adjustments to our largely productive store base; reductions in
overall capital spending, as well as shifting of emphasis from real
estate to digital and supply chain; and various additional expense
initiatives to create a more flexible, efficient organization."
Store Base Update
During the second quarter, the
Company opened 24 new stores, remodeled or relocated 38 stores, and
closed 19 stores. As of July 29,
2017, the Company operated 3,359 stores in 23 countries in
North America, Europe, Australia, and New Zealand. In addition,
68 franchised Foot Locker stores were operating in the Middle East, as well as 14 franchised Runners
Point stores in Germany.
The Company is hosting a live conference call at 9:00 a.m. (EDT) today, August 18, 2017, to review these results and
discuss the outlook for the remainder of 2017. This
conference call may be accessed live by dialing 1-800-897-4057
(U.S. and Canada) or +44
207-855-8974 (International), or via the Investor Relations section
of the Foot Locker, Inc. website at
http://www.footlocker-inc.com. Please log on to the website
15 minutes prior to the call in order to register. A replay
of the call will be available via webcast from the same Investor
Relations section of the Foot Locker, Inc. website at
http://www.footlocker-inc.com through September 1, 2017.
Disclosure Regarding Forward-Looking
Statements
This report contains forward-looking statements within the
meaning of the federal securities laws. Other than statements of
historical facts, all statements which address activities, events,
or developments that the Company anticipates will or may occur in
the future, including, but not limited to, such things as future
capital expenditures, expansion, strategic plans, financial
objectives, 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 which are 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),
cybersecurity breaches, pandemics and similar major health
concerns, unseasonable weather, deterioration of global financial
markets, economic conditions worldwide, 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 and
strategic plans effectively with regard to each of its business
units, and risks associated with global product sourcing, including
political instability, changes in import regulations, and
disruptions to transportation services and distribution.
For additional discussion on risks and uncertainties that may
affect forward-looking statements, see "Risk Factors" disclosed in
the 2016 Annual Report on Form 10-K. 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 July
29, 2017 and July 30, 2016
|
(In millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
Year-to-Date
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Sales
|
|
$
|
|
|
|
1,701
|
|
$
|
|
|
|
1,780
|
|
$
|
|
|
|
3,702
|
|
$
|
|
|
|
3,767
|
Cost of sales
(1)
|
|
|
|
|
|
1,198
|
|
|
|
|
|
1,193
|
|
|
|
|
|
2,519
|
|
|
|
|
|
2,484
|
Gross
margin
|
|
|
|
|
|
503
|
|
|
|
|
|
587
|
|
|
|
|
|
1,183
|
|
|
|
|
|
1,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
|
|
|
|
|
339
|
|
|
|
|
|
350
|
|
|
|
|
|
710
|
|
|
|
|
|
711
|
Depreciation and
amortization
|
|
|
|
|
|
42
|
|
|
|
|
|
39
|
|
|
|
|
|
83
|
|
|
|
|
|
78
|
Income from
operations
|
|
|
|
|
|
122
|
|
|
|
|
|
198
|
|
|
|
|
|
390
|
|
|
|
|
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Litigation
charge
|
|
|
|
|
|
50
|
|
|
|
|
|
—
|
|
|
|
|
|
50
|
|
|
|
|
|
—
|
Interest
(income)/expense, net
|
|
|
|
|
|
(1)
|
|
|
|
|
|
1
|
|
|
|
|
|
(1)
|
|
|
|
|
|
1
|
Other
income
|
|
|
|
|
|
—
|
|
|
|
|
|
(1)
|
|
|
|
|
|
(1)
|
|
|
|
|
|
(3)
|
Income before income
taxes
|
|
|
|
|
|
73
|
|
|
|
|
|
198
|
|
|
|
|
|
342
|
|
|
|
|
|
496
|
Income tax
expense
|
|
|
|
|
|
22
|
|
|
|
|
|
71
|
|
|
|
|
|
111
|
|
|
|
|
|
178
|
Net
income
|
|
$
|
|
|
|
51
|
|
$
|
|
|
|
127
|
|
$
|
|
|
|
231
|
|
$
|
|
|
|
318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
|
|
|
0.39
|
|
$
|
|
|
|
0.94
|
|
$
|
|
|
|
1.74
|
|
$
|
|
|
|
2.33
|
Weighted-average
diluted shares
outstanding
|
|
|
|
|
|
132.0
|
|
|
|
|
|
135.5
|
|
|
|
|
|
132.3
|
|
|
|
|
|
136.6
|
Reconciliation of
GAAP to Non-GAAP Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Second
Quarter
|
|
Year-to-Date
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
After
|
|
|
|
|
After
|
|
|
|
|
After
|
|
|
|
|
After
|
|
|
|
|
|
Tax
|
|
EPS
|
|
Tax
|
|
EPS
|
|
Tax
|
|
EPS
|
|
Tax
|
|
EPS
|
GAAP net
income
|
|
$
|
51
|
|
$
|
0.39
|
|
$
|
127
|
|
$
|
0.94
|
|
$
|
231
|
|
$
|
1.74
|
|
$
|
318
|
|
$
|
2.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Litigation charge
(2)
|
|
|
30
|
|
|
0.23
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
0.23
|
|
|
—
|
|
|
—
|
Non-GAAP
results
|
|
$
|
81
|
|
$
|
0.62
|
|
$
|
127
|
|
$
|
0.94
|
|
$
|
261
|
|
$
|
1.97
|
|
$
|
318
|
|
$
|
2.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Footnotes:
|
|
|
(1)
|
Cost of sales
includes: the cost of merchandise, freight, distribution, shipping
and handling, occupancy and buyers' compensation. Occupancy costs
include rent, common area maintenance charges, real estate taxes,
general maintenance, and utilities. Cost of sales is exclusive of
depreciation and amortization, which is shown
separately.
|
|
|
(2)
|
During the second
quarter of 2017, the Company recorded a pre-tax charge of $50
million ($30 million after-tax, applying a marginal tax rate, or
$0.23 per diluted share) in connection with its U.S. retirement
plan litigation. The Company had previously recorded a pre-tax
charge for $100 million during 2015. This charge reflects the
Company's revised estimate of its exposure for this matter,
bringing the total pre-tax amount accrued to $150 million. The
Company will continue to vigorously defend itself in this case. In
light of the uncertainties involved in this matter, there is no
assurance that the ultimate resolution will not differ from the
amount currently accrued by the Company.
|
FOOT LOCKER,
INC. Condensed Consolidated Balance
Sheets (unaudited) (In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
29,
|
|
July
30,
|
|
|
2017
|
|
2016
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,043
|
|
$
|
945
|
Merchandise
inventories
|
|
|
1,290
|
|
|
1,339
|
Other current
assets
|
|
|
311
|
|
|
301
|
|
|
|
2,644
|
|
|
2,585
|
Property and
equipment, net
|
|
|
821
|
|
|
726
|
Deferred
taxes
|
|
|
167
|
|
|
174
|
Other
assets
|
|
|
314
|
|
|
277
|
|
|
$
|
3,946
|
|
$
|
3,762
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
162
|
|
$
|
348
|
Accrued and other
liabilities
|
|
|
308
|
|
|
326
|
Current portion of
capital lease obligations
|
|
|
—
|
|
|
1
|
|
|
|
470
|
|
|
675
|
Long-term debt and
obligations under capital leases
|
|
|
126
|
|
|
128
|
Other
liabilities
|
|
|
456
|
|
|
381
|
Total
liabilities
|
|
|
1,052
|
|
|
1,184
|
Total shareholders'
equity
|
|
|
2,894
|
|
|
2,578
|
|
|
$
|
3,946
|
|
$
|
3,762
|
FOOT LOCKER,
INC. Store and Square
Footage (unaudited)
|
|
|
Store activity is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
28,
|
|
|
July
29,
|
Relocations/
|
|
|
2017
|
Opened
|
Closed
|
2017
|
Remodels
|
Foot Locker
US
|
|
948
|
3
|
19
|
932
|
25
|
Foot Locker
Europe
|
|
622
|
9
|
7
|
624
|
22
|
Foot Locker
Canada
|
|
119
|
1
|
3
|
117
|
3
|
Foot Locker Asia
Pacific
|
|
95
|
3
|
1
|
97
|
7
|
Kids Foot
Locker
|
|
411
|
24
|
3
|
432
|
19
|
Lady Foot
Locker
|
|
124
|
—
|
12
|
112
|
—
|
Champs
Sports
|
|
545
|
3
|
2
|
546
|
10
|
Footaction
|
|
261
|
8
|
7
|
262
|
13
|
Runners
Point
|
|
122
|
1
|
1
|
122
|
—
|
Sidestep
|
|
86
|
—
|
2
|
84
|
—
|
SIX:02
|
|
30
|
2
|
1
|
31
|
—
|
Total
|
|
3,363
|
54
|
58
|
3,359
|
99
|
Selling and gross
square footage are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28,
2017
|
|
July 29,
2017
|
(in
thousands)
|
|
Selling
|
Gross
|
|
Selling
|
Gross
|
Foot Locker
US
|
|
2,453
|
4,250
|
|
2,452
|
4,261
|
Foot Locker
Europe
|
|
907
|
1,971
|
|
922
|
1,999
|
Foot Locker
Canada
|
|
265
|
432
|
|
273
|
443
|
Foot Locker Asia
Pacific
|
|
134
|
220
|
|
138
|
230
|
Kids Foot
Locker
|
|
688
|
1,175
|
|
736
|
1,257
|
Lady Foot
Locker
|
|
167
|
280
|
|
152
|
256
|
Champs
Sports
|
|
1,930
|
2,978
|
|
1,949
|
3,013
|
Footaction
|
|
786
|
1,309
|
|
815
|
1,361
|
Runners
Point
|
|
162
|
267
|
|
156
|
267
|
Sidestep
|
|
81
|
135
|
|
77
|
132
|
SIX:02
|
|
61
|
101
|
|
63
|
106
|
Total
|
|
7,634
|
13,118
|
|
7,733
|
13,325
|
Contact:
|
John A.
Maurer
|
|
Vice
President,
|
|
Treasurer and
Investor Relations
|
|
Foot Locker,
Inc.
|
|
(212)
720-4092
|
View original
content:http://www.prnewswire.com/news-releases/foot-locker-inc-reports-2017-second-quarter-results-300506367.html
SOURCE Foot Locker, Inc.