- Solid second quarter sales and earnings compared to record
results in 2021
- Total sales decreased 9.2% from 2021 and increased 16.4%
from 2019
- Comparable-store sales decreased 10.3%
year-over-year
- EPS of $0.99 and Non-GAAP EPS
of $1.10
- Well positioned for Back-to-School season with high-quality,
fresh product
- Expect to achieve the lower end of original earnings
guidance range
- Repurchased $40 million of
stock
NEW
YORK, Aug. 19, 2022 /PRNewswire/ -- Foot
Locker, Inc. (NYSE: FL), the New
York-based specialty athletic retailer, today reported
financial results for its second quarter ended July 30, 2022.
"Despite an increasingly challenging macroeconomic
backdrop, we delivered a solid quarter against the favorable fiscal
stimulus and promotional environment from last year," said
Richard Johnson, Chairman and Chief
Executive Officer. "Driven by strong execution from our
team and ongoing progress against our key objectives, we grew our
sales 16.4% above levels from 2019."
Mr. Johnson continued, "Our strategy of diversifying our
brand portfolio and offering more choice continues to resonate with
consumers and is enabling us to expand our customer base. We are
confident that our operational excellence, our improving ability to
fuel our customer's desire for self-expression, and the secular
trends driving our categories, put us in a strong position to
navigate the expected ongoing macroeconomic headwinds in the back
half of 2022."
Second Quarter
Results
The Company reported net income of
$94 million, or $0.99 per share, for the 13 weeks ended
July 30, 2022, compared with net
income of $430 million, or
$4.09 per share, for the
corresponding prior-year period.
On a non-GAAP basis, the Company earned $1.10 per share, compared with non-GAAP earnings
of $2.09 per share in the prior-year
period. Please see the GAAP to non-GAAP reconciliation
below.
Second quarter comparable-store sales decreased by 10.3%
versus record sales levels from last year. Total sales decreased by
9.2%, to $2,065 million, compared
with sales of $2,275 million in the
second quarter of 2021. Excluding the effect of foreign exchange
rate fluctuations, total sales for the second quarter decreased by
6.1%.
Gross margin declined by 340 basis points compared with
the prior-year period, driven mainly by higher markdowns, as the
promotional environment started to normalize after last year's
unusually favorable backdrop, followed by supply chain costs, and
occupancy deleverage.
SG&A deleveraged by 210 basis points, driven mainly by
labor inflation and the decline in sales.
Year-To-Date Results
For the first
six months of the year, the Company posted net income of
$227 million, or $2.36 per share on a GAAP basis, compared with
$632 million, or $6.02 per share, for the corresponding period of
2021. On a non-GAAP basis, earnings per share for the
six-month period totaled $2.71,
compared to $4.05 per share in the
prior year period in 2021. Year-to-date sales were
$4,240 million, a decrease of 4.2%
compared to the sales of $4,428
million in the corresponding six months of 2021.
Year-to-date, comparable store sales decreased 6.2%, while total
year-to-date sales, excluding the effect of foreign currency
fluctuations, decreased by 1.7%.
Financial Position
As of July
30, 2022, merchandise inventories were $1,644 million, up 52%
compared to the supply-constrained levels at the end of the second
quarter last year. Current inventory quality and aging are
healthy, positioning the Company well for the Back-to-School season
and the third quarter overall. At quarter-end, the Company's
cash and cash equivalents totaled $386 million, while debt
was $455 million.
During the second quarter of 2022, the Company repurchased
1.4 million shares of its stock for $40 million and paid a
quarterly dividend of $0.40 per share, for a total
of $38 million.
Financial Outlook
Andrew Page, Executive Vice President and Chief
Financial Officer, said, "Following our solid results for the
second quarter, against record results last year, we remain
confident in our ability to achieve earnings within our original
guidance range. But recognizing that the back half will
likely see more pressure than we originally anticipated, we now
expect to be at the lower end. Our balance sheet, real estate
flexibility, and relationships with vendors all remain strategic
assets that will aid us in navigating ongoing macroeconomic
volatility while we continue to serve the sport and sneaker
communities."
The Company's updated full-year 2022 outlook is summarized
in the table below.
Metric
|
Prior Guidance
|
Updated Guidance
|
Commentary
|
Sales Change
|
Upper end of down 4% to
6%
|
Down 6% to
7%
|
Foreign exchange
pressure
Team Sales
divestiture
|
Comparable Sales
Growth
|
Upper end of down 8% to
10%
|
Down 8% to
9%
|
|
Square Footage
Growth
|
Down 1% to
2%
|
Down 1% to
2%
|
|
Gross Margin
|
30.6% to
30.8%
|
31.1% to
31.2%
|
Better occupancy trends
and supply chain costs
Partially offset by
higher markdowns
|
SG&A
Rate
|
20.7% to
20.9%
|
21.3% to
21.4%
|
Ongoing inflation
pressure
|
D&A
|
~$214
million
|
~$213
million
|
|
Interest
|
~$20 million
|
~$20 million
|
|
Tax Rate
(Non-GAAP)
|
29% to 30%
|
30.0% to
30.5%
|
|
Non-GAAP EPS
|
Upper end of
$4.25-$4.60
|
$4.25-$4.45
|
Lower end of original
range
|
Capital
Expenditures
|
Up to $275
million
|
Up to $275
million
|
|
|
The Company provides
earnings guidance only on a non-GAAP basis and does not provide a
reconciliation of the Company's forward-looking adjusted income
taxes and diluted earnings per share guidance to the most directly
comparable GAAP financial measures because of the inherent
difficulty in forecasting and quantifying certain amounts that are
necessary for such reconciliations.
|
Store Base Update
During the second
quarter, the Company opened 34 new stores, remodeled or relocated
24 stores, and closed 50 stores.
As of July 30, 2022, the
Company operated 2,799 stores in 28 countries in North
America, Europe, Asia, Australia, and New Zealand. In addition,
148 franchised stores were operating in the Middle East
and Asia.
Conference Call and Webcast
The
Company is hosting a live conference call at 9:00 a.m. ET today, Friday, August 19, 2022, to review these results
and provide an update on the business. An investor presentation
will be available under the Investor Relations section of the
Company's corporate website before the start of the conference
call. This conference call may be accessed live by calling
toll-free 1-844-701-1163 or international toll 1-412-317-5490, or
via the Investor Relations section of
footlocker-inc.com. Please log on to the
website 15 minutes prior to the call to register. An archived
replay of the conference call can be accessed approximately one
hour following the end of the call at 1-877-344‑7529 in the U.S. or
1-855-669-9658 in Canada or
1-412-317-0088 internationally with passcode 5833077 through
September 2, 2022. A replay of the
call will also be available via webcast from
footlocker-inc.com.
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 U.S. Securities and Exchange
Commission.
These forward-looking statements are based largely on
our expectations and judgments and are subject to a number of risks
and uncertainties, many of which are unforeseeable and beyond our
control. For additional discussion on risks and uncertainties that
may affect forward-looking statements, see "Risk Factors" disclosed
in the Company's Annual Report on Form 10-K for the year ended
January 29, 2022 filed on
March 24, 2022. 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.
Consolidated Statements of
Operations
(unaudited)
Periods ended July 30, 2022 and July 31,
2021
(In millions, except per share
amounts)
|
|
|
|
Second Quarter
|
|
Year-to-Date
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Sales
|
|
$
|
2,065
|
|
$
|
2,275
|
|
$
|
4,240
|
|
$
|
4,428
|
Cost of
sales
|
|
|
1,411
|
|
|
1,477
|
|
|
2,846
|
|
|
2,881
|
Selling, general, and
administrative expenses
|
|
|
452
|
|
|
450
|
|
|
915
|
|
|
868
|
Depreciation and
amortization
|
|
|
51
|
|
|
48
|
|
|
105
|
|
|
93
|
Impairment and other
charges
|
|
|
12
|
|
|
36
|
|
|
18
|
|
|
40
|
Income from
operations
|
|
|
139
|
|
|
264
|
|
|
356
|
|
|
546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
(5)
|
|
|
(2)
|
|
|
(10)
|
|
|
(4)
|
Other income /
(expense), net
|
|
|
9
|
|
|
325
|
|
|
(13)
|
|
|
329
|
Income before income
taxes
|
|
|
143
|
|
|
587
|
|
|
333
|
|
|
871
|
Income tax
expense
|
|
|
49
|
|
|
157
|
|
|
107
|
|
|
239
|
Net income
|
|
|
94
|
|
|
430
|
|
$
|
226
|
|
$
|
632
|
Net loss attributable
to noncontrolling interests
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
Net income attributable
to Foot Locker, Inc.
|
|
$
|
94
|
|
$
|
430
|
|
$
|
227
|
|
$
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
|
0.99
|
|
$
|
4.09
|
|
$
|
2.36
|
|
$
|
6.02
|
Weighted-average
diluted shares outstanding
|
|
|
95.1
|
|
|
105.2
|
|
|
96.1
|
|
|
105.1
|
Non-GAAP Financial Measures
In addition to reporting the Company's financial results
in accordance with generally accepted accounting principles
("GAAP"), the Company reports certain financial results that differ
from what is reported under GAAP. Effective with the first quarter
of 2022, the Company excludes all gains or losses associated with
the minority investments to arrive at non-GAAP earnings; previously
only certain amounts were adjusted. Those amounts not previously
excluded from non-GAAP earnings during 2021 represented
$17 million ($12 million, after tax or $0.12 per share), $27
million ($20 million after tax
or $0.19 per share), and $27 million ($20
million or $0.21 per share)
for the second, third, and fourth quarters of 2021, respectively.
For the full year, that represented income of $71 million ($52
million after tax or $0.50 per
share) and was primarily related to our investment in Retailors,
Ltd. Amounts recorded prior to 2021 were not significant. Non-GAAP
financial measures that will be presented will exclude (i) minority
investments, (ii) impairments and other charges, and (iii) certain
tax matters that we believe are nonrecurring or unusual in
nature.
Certain financial measures are identified as non-GAAP,
such as sales changes excluding foreign currency fluctuations,
adjusted income before income taxes, adjusted net income, and
adjusted diluted earnings per share. We present certain amounts as
excluding the effects of foreign currency fluctuations, which are
also considered non-GAAP measures. Where amounts are expressed as
excluding the effects of foreign currency fluctuations, such
changes are determined by translating all amounts in both years
using the prior-year average foreign exchange rates. Presenting
amounts on a constant currency basis is useful to investors because
it enables them to better understand the changes in our business
that are not related to currency movements.
These non-GAAP measures are presented because we believe
they assist investors in comparing our performance across reporting
periods on a consistent basis by excluding items that we do not
believe are indicative of our core business or affect
comparability. In addition, these non-GAAP measures are useful in
assessing our progress in achieving our long-term financial
objectives and are consistent with how management compensation is
determined.
We estimate the tax effect of all non-GAAP adjustments by
applying a marginal tax rate to each of the respective items. The
income tax items represent the discrete amount that affected the
period. The non-GAAP financial information is provided in addition
to, and not as an alternative to, our reported results prepared in
accordance with GAAP. The various non-GAAP adjustments
are summarized in the tables below.
FOOT LOCKER, INC.
Non-GAAP Reconciliation
(unaudited)
Periods ended July 30, 2022 and July 31,
2021
(In millions, except per share
amounts)
|
|
Reconciliation of
GAAP to non-GAAP results:
|
|
|
|
Second Quarter
|
|
Year-to-Date
|
|
|
2022
|
|
2021 (1)
|
|
2022
|
|
2021 (1)
|
Pre-tax income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
$
|
143
|
|
$
|
587
|
|
$
|
333
|
|
$
|
871
|
Pre-tax adjustments
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges (2)
|
|
|
12
|
|
|
36
|
|
|
18
|
|
|
40
|
Other income / expense
(3)
|
|
|
(6)
|
|
|
(320)
|
|
|
18
|
|
|
(320)
|
Adjusted income before
income taxes (non-GAAP)
|
|
$
|
149
|
|
$
|
303
|
|
$
|
369
|
|
$
|
591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Foot Locker, Inc.
|
|
$
|
94
|
|
$
|
430
|
|
$
|
227
|
|
$
|
632
|
After-tax adjustments
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges, net of income tax benefit of $3,
$9, $5, and $10 million, respectively (2)
|
|
|
9
|
|
|
27
|
|
|
13
|
|
|
30
|
Other income / expense,
net of income tax (expense)/benefit of
$(3), $(84), $3 and $(84) million, respectively
(3)
|
|
|
(3)
|
|
|
(236)
|
|
|
15
|
|
|
(236)
|
Tax reserves charge
(4)
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
Adjusted net income
(non-GAAP)
|
|
$
|
105
|
|
$
|
221
|
|
$
|
260
|
|
$
|
426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Year-to-Date
|
|
|
2022
|
|
2021 (1)
|
|
2022
|
|
2021 (1)
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
|
0.99
|
|
$
|
4.09
|
|
$
|
2.36
|
|
$
|
6.02
|
Diluted EPS amounts
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges (2)
|
|
|
0.09
|
|
|
0.25
|
|
|
0.14
|
|
|
0.28
|
Other income / expense
(3)
|
|
|
(0.03)
|
|
|
(2.25)
|
|
|
0.16
|
|
|
(2.25)
|
Tax reserves charge
(4)
|
|
|
0.05
|
|
|
—
|
|
|
0.05
|
|
|
—
|
Adjusted diluted
earnings per share (non-GAAP)
|
|
$
|
1.10
|
|
$
|
2.09
|
|
$
|
2.71
|
|
$
|
4.05
|
Notes on Non-GAAP
Adjustments:
|
|
|
(1)
|
Non-GAAP results in the
second quarter and year-to-date periods of 2021 previously
disclosed were affected by the current year change in presentation
of minority investments discussed above, which excluded $17 million
of income ($12 million after tax or $0.12 per share) in each
period.
|
|
|
(2)
|
For the second quarter
of 2022, impairment and other charges included $9 million of
transformation consulting, $1 million of acquisition integration
costs, and $2 million of impairment of long-lived assets and
right-of-use assets and accelerated tenancy charges. For
year-to-date 2022, impairment and other charges included $10
million of transformation consulting, $3 million of acquisition
integration costs, and $5 million of impairment of long-lived
assets and right-of-use assets and accelerated tenancy
charges.
|
|
|
|
For the second quarter
of 2021, impairment and other charges included $39 million of
impairment of long-lived assets and right-of-use assets and
accelerated tenancy charges associated with the decision to exit
Footaction stores and an additional $4 million in other
lease-related termination costs. Partially offsetting these losses
was $11 million of additional insurance recovery related to the
prior year social unrest losses, $7 million of which is classified
as impairment and other charges as it related to the book value of
losses recorded in 2020, with $4 million recorded in other
income.
|
|
|
|
Also included in the
year-to-date period of 2021 is a $2 million charge related to one
of our minority investments and charges of $2 million primarily
related to severance costs in connection with the reorganization of
certain support functions.
|
|
|
(3)
|
Other income / expense
for the second quarter of 2022 primarily consisted of an $18
million gain on the divestiture of the Team Sales business,
partially offset by a $12 million loss on minority investments,
primarily due to a change in fair value of the investment in
Retailors, Ltd., a publicly-listed entity. The year-to-date 2022
amount also includes $24 million of additional losses on minority
investments, primarily from Retailors, Ltd.
|
|
|
|
For the second quarter
and year-to-date 2021, other income included $316 million of gains
on minority investments, primarily related to a higher valuation on
our investment in GOAT and the fair value adjustment of Retailors,
Ltd. Other income also included $4 million of insurance
recoveries.
|
|
|
(4)
|
In the second quarter
of 2022, the Company recorded a $5 million charge related to the
Company's income tax reserves due to the resolution of a foreign
tax settlement.
|
FOOT LOCKER, INC.
Consolidated Balance Sheets
(unaudited)
(In millions)
|
|
|
|
July 30,
|
|
July 31,
|
|
|
2022
|
|
2021
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
386
|
|
$
|
1,845
|
Merchandise
inventories
|
|
|
1,644
|
|
|
1,081
|
Other current
assets
|
|
|
285
|
|
|
252
|
|
|
|
2,315
|
|
|
3,178
|
Property and equipment,
net
|
|
|
899
|
|
|
743
|
Operating lease
right-of-use assets
|
|
|
2,526
|
|
|
2,569
|
Deferred
taxes
|
|
|
74
|
|
|
108
|
Goodwill
|
|
|
773
|
|
|
158
|
Other intangible
assets, net
|
|
|
432
|
|
|
16
|
Minority
investments
|
|
|
736
|
|
|
728
|
Other assets
|
|
|
113
|
|
|
85
|
|
|
$
|
7,868
|
|
$
|
7,585
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
596
|
|
$
|
539
|
Accrued and other
liabilities
|
|
|
435
|
|
|
474
|
Current portion of
long-term debt and obligations under finance leases
|
|
|
6
|
|
|
102
|
Current portion of
lease obligations
|
|
|
548
|
|
|
566
|
|
|
|
1,585
|
|
|
1,681
|
Long-term debt and
obligations under finance leases
|
|
|
449
|
|
|
10
|
Long-term lease
obligations
|
|
|
2,287
|
|
|
2,363
|
Other
liabilities
|
|
|
330
|
|
|
190
|
Total
liabilities
|
|
|
4,651
|
|
|
4,244
|
Total shareholders'
equity
|
|
|
3,217
|
|
|
3,341
|
|
|
$
|
7,868
|
|
$
|
7,585
|
FOOT LOCKER, INC.
Store Count and Square Footage
(unaudited)
|
|
Store activity is as
follows:
|
|
|
|
January 29,
|
|
|
|
|
|
July 30,
|
|
Relocations/
|
|
|
2022
|
|
Opened
|
|
Closed
|
|
2022
|
|
Remodels
|
Foot Locker
U.S.
|
|
802
|
|
15
|
|
42
|
|
775
|
|
16
|
Foot Locker
Europe
|
|
626
|
|
11
|
|
7
|
|
630
|
|
12
|
Foot Locker
Canada
|
|
95
|
|
1
|
|
5
|
|
91
|
|
—
|
Foot Locker
Pacific
|
|
94
|
|
—
|
|
—
|
|
94
|
|
5
|
Foot Locker
Asia
|
|
30
|
|
3
|
|
—
|
|
33
|
|
—
|
Kids Foot
Locker
|
|
410
|
|
17
|
|
13
|
|
414
|
|
4
|
Lady Foot
Locker
|
|
14
|
|
—
|
|
4
|
|
10
|
|
—
|
Champs
Sports
|
|
525
|
|
1
|
|
14
|
|
512
|
|
3
|
Footaction
|
|
41
|
|
—
|
|
27
|
|
14
|
|
—
|
Sidestep
|
|
86
|
|
1
|
|
5
|
|
82
|
|
—
|
WSS
|
|
98
|
|
7
|
|
—
|
|
105
|
|
4
|
atmos
|
|
37
|
|
2
|
|
—
|
|
39
|
|
3
|
Total
|
|
2,858
|
|
58
|
|
117
|
|
2,799
|
|
47
|
Selling and gross
square footage are as follows:
|
|
|
|
July 31, 2021
|
July 30, 2022
|
(in
thousands)
|
|
Selling
|
|
Gross
|
|
Selling
|
|
Gross
|
Foot Locker
U.S.
|
|
2,372
|
|
4,133
|
|
2,363
|
|
4,079
|
Foot Locker
Europe
|
|
1,027
|
|
2,177
|
|
1,104
|
|
2,284
|
Foot Locker
Canada
|
|
254
|
|
415
|
|
250
|
|
411
|
Foot Locker
Pacific
|
|
174
|
|
273
|
|
196
|
|
303
|
Foot Locker
Asia
|
|
105
|
|
185
|
|
126
|
|
233
|
Kids Foot
Locker
|
|
719
|
|
1,235
|
|
761
|
|
1,294
|
Lady Foot
Locker
|
|
25
|
|
57
|
|
19
|
|
31
|
Champs
Sports
|
|
1,896
|
|
2,965
|
|
1,890
|
|
2,958
|
Footaction
|
|
666
|
|
1,089
|
|
38
|
|
67
|
Sidestep
|
|
91
|
|
166
|
|
101
|
|
191
|
WSS
(1)
|
|
—
|
|
—
|
|
1,035
|
|
1,301
|
atmos
(2)
|
|
—
|
|
—
|
|
38
|
|
64
|
Total
|
|
7,329
|
|
12,695
|
|
7,921
|
|
13,216
|
|
(1)
The Company acquired 93 existing WSS stores in September
2021.
|
(2)
The Company acquired 38 existing atmos stores in November
2021.
|
Contact: Robert Higginbotham
Vice President, Investor Relations
robert.higginbotham@footlocker.com
(212) 720-4600
View original
content:https://www.prnewswire.com/news-releases/foot-locker-inc-reports-2022-second-quarter-results-updates-2022-outlook-301608980.html
SOURCE Foot Locker IR