- Third quarter sales and earnings above
expectations
- Total sales decreased 0.7% from 2021 on
a reported basis; increased 3.3% in constant currency
- Comparable-store sales increased 0.8%
year-over-year
- EPS of $1.01 and
Non-GAAP EPS of $1.27
- Raises 2022 EPS guidance to $4.42-$4.50,
compared to prior range of $4.25-$4.45
NEW
YORK, Nov. 18, 2022 /PRNewswire/ -- Foot
Locker, Inc. (NYSE: FL), the New
York-based specialty athletic retailer, today reported
financial results for its third quarter ended October 29, 2022.
"Foot Locker's solid third quarter results in the midst of
ongoing macroeconomic challenges are a testament to the strengths
of this organization that I am honored to now be leading," said
Mary Dillon, President and Chief
Executive Officer. "Despite the tough environment, our
expanding customer base remained resilient, and I'm proud that our
team delivered sales above our expectations, thanks to their
exceptional execution."
Ms. Dillon continued, "I see tremendous opportunity to further
leverage the power of our brand equity and our incredible field
team to drive our growth in this exciting category."
Third Quarter Results
The Company reported net
income of $96 million, or
$1.01 per share, for the 13 weeks
ended October 29, 2022, compared with
$158 million, or $1.52 per share, for the corresponding prior-year
period.
On a non-GAAP basis, the Company earned $1.27 per share, compared with non-GAAP earnings
of $1.74 per share in the prior-year
period. Please see the GAAP to non-GAAP reconciliation
below.
Third quarter comparable-store sales increased by 0.8% against
record sales levels last year, driven by strong demand, the
Company's brand diversification efforts, and improved access to
high-quality inventory. Total sales decreased by 0.7%, to
$2,173 million, compared with sales
of $2,189 million in the third
quarter of 2021. Excluding the effect of foreign exchange rate
fluctuations, total sales for the third quarter increased by
3.3%.
Gross margin declined by 270 basis points compared with the
prior-year period, driven mainly by higher markdowns on increased
promotional activity across the industry, and modest supply chain
cost pressure.
SG&A increased by 60 basis points, driven mainly by labor
inflation, partially offset by early savings from the Company's
cost optimization program.
Year-To-Date Results
For the first nine months of the
year, the Company posted net income of $323
million, or $3.38 per share,
compared with $790 million, or
$7.54 per share, for the
corresponding prior-year period. On a non-GAAP basis,
earnings per share for the nine-month period totaled $3.98, compared to $5.80 in the corresponding prior-year
period. Year-to-date sales were $6,413
million, a decrease of 3.1% compared to $6,617 million in the corresponding nine months
of 2021. Year-to-date, comparable store sales decreased 3.9%, while
total year-to-date sales, excluding the effect of foreign currency
fluctuations, decreased by 0.1%.
Financial Position
As of October 29, 2022,
merchandise inventories were $1,685 million, up 29.5% compared
to the end of the third quarter last year. Current inventory
quality and aging continue to be healthy and position the Company
well to fulfill demand for the holiday season and the fourth
quarter overall. At quarter-end, the Company's cash and cash
equivalents totaled $351 million, while debt was $454
million.
During the third quarter of 2022, the Company paid a quarterly
dividend of $0.40 per share, for a total of $37
million.
Financial Outlook
Andrew
Page, Executive Vice President and Chief Financial Officer,
said, "Following better-than-expected results for the third quarter
and strong momentum coming out of the quarter, we are increasing
our outlook for the fourth quarter and the full year. While
the macroeconomic environment remains uncertain, our demand trends,
and inventory position in high-quality product gives us confidence
we can achieve our new range, while also remaining flexible to
manage through ongoing volatility."
The Company's fourth quarter and updated full-year 2022 outlooks
are summarized in the table below.
|
2022 Guidance
|
|
Metric
|
Prior Full Year
|
Updated Full
Year
|
Fourth Quarter
|
Commentary
|
Total Sales
|
Down 6% to
7%
|
Down 4% to
5%
|
Down 8% to
10%
|
Ongoing foreign
currency pressure
|
Comp Sales
|
Down 8% to
9%
|
Down 4% to
5%
|
Down 6% to
8%
|
Strong demand,
execution, and
access to inventory
|
Square
Footage
|
Down 1% to
2%
|
Down
slightly
|
Down
slightly
|
|
Gross Margin
|
31.1% to
31.2%
|
31.7% to
31.8%
|
29.0% to
29.3%
|
Ongoing promotional
pressure
|
SG&A
Rate
|
21.3% to
21.4%
|
~22.0%
|
23.3% to
23.4%
|
Labor inflation,
partially offset by
cost optimization
|
D&A
|
~$213
million
|
~$210
million
|
~$53 million
|
|
Interest
|
~$20 million
|
~$17 million
|
~$4 million
|
|
Tax Rate
(Non-GAAP)
|
30.0% to
30.5%
|
~30.7%
|
~32.5%
|
|
Non-GAAP
EPS
|
$4.25-$4.45
|
$4.42-$4.50
|
$0.45-$0.53
|
Raising full year
outlook
|
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 third quarter, the
Company opened 24 new stores, remodeled or relocated 23 stores, and
closed 29 stores.
As of October 29, 2022, the
Company operated 2,794 stores across 28 countries in North
America, Europe, Asia, Australia, and New Zealand. In addition,
155 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, November 18, 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 3878666 through December 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 regarding 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 the
forward-looking statements, whether as a result of new information,
future events, or otherwise.
FOOT LOCKER, INC.
Consolidated Statements of Operations
(unaudited)
|
|
Periods ended
October 29, 2022 and October 30, 2021
(In millions, except per share amounts)
|
|
|
|
Third Quarter
|
|
Year-to-Date
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Sales
|
|
$
|
2,173
|
|
$
|
2,189
|
|
$
|
6,413
|
|
$
|
6,617
|
Cost of
sales
|
|
|
1,477
|
|
|
1,429
|
|
|
4,323
|
|
|
4,310
|
Selling, general and
administrative expenses
|
|
|
467
|
|
|
458
|
|
|
1,382
|
|
|
1,326
|
Depreciation and
amortization
|
|
|
52
|
|
|
49
|
|
|
157
|
|
|
142
|
Impairment and other
charges
|
|
|
20
|
|
|
57
|
|
|
38
|
|
|
97
|
Income from
operations
|
|
|
157
|
|
|
196
|
|
|
513
|
|
|
742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
(3)
|
|
|
(4)
|
|
|
(13)
|
|
|
(8)
|
Other income /
(expense), net
|
|
|
(11)
|
|
|
30
|
|
|
(24)
|
|
|
359
|
Income before income
taxes
|
|
|
143
|
|
|
222
|
|
|
476
|
|
|
1,093
|
Income tax
expense
|
|
|
47
|
|
|
64
|
|
|
154
|
|
|
303
|
Net income
|
|
|
96
|
|
|
158
|
|
$
|
322
|
|
$
|
790
|
Net loss attributable
to noncontrolling interests
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
Net income attributable
to Foot Locker, Inc.
|
|
$
|
96
|
|
$
|
158
|
|
$
|
323
|
|
$
|
790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
|
1.01
|
|
$
|
1.52
|
|
$
|
3.38
|
|
$
|
7.54
|
Weighted-average
diluted shares outstanding
|
|
|
94.7
|
|
|
104.4
|
|
|
95.7
|
|
|
104.9
|
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, this
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 executive compensation is
determined.
We estimate the tax effect of all non-GAAP adjustments by
applying a marginal tax rate to each item. The income tax items
represent the discrete amount that affected the period. The
non-GAAP financial information is provided in addition, 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
October 29, 2022 and October 30, 2021
(In millions, except per share amounts)
|
|
Reconciliation of
GAAP to non-GAAP results:
|
|
|
|
Third Quarter
|
|
Year-to-Date
|
|
|
2022
|
|
2021 (1)
|
|
2022
|
|
2021 (1)
|
Pre-tax income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
$
|
143
|
|
$
|
222
|
|
$
|
476
|
|
$
|
1,093
|
Pre-tax adjustments
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges (2)
|
|
|
20
|
|
|
57
|
|
|
38
|
|
|
97
|
Other income / expense
(3)
|
|
|
14
|
|
|
(27)
|
|
|
32
|
|
|
(347)
|
Adjusted income before
income taxes (non-GAAP)
|
|
$
|
177
|
|
$
|
252
|
|
$
|
546
|
|
$
|
843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Foot Locker, Inc.
|
|
$
|
96
|
|
$
|
158
|
|
$
|
323
|
|
$
|
790
|
After-tax adjustments
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges, net of income tax benefit of $5,
$14, $10, and $24 million, respectively (2)
|
|
|
15
|
|
|
43
|
|
|
28
|
|
|
73
|
Other income / expense,
net of income tax benefit/(expense) of
$4, $(7), $7, and $(91) million, respectively
(3)
|
|
|
10
|
|
|
(20)
|
|
|
25
|
|
|
(256)
|
Tax reserves charge
(4)
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
Adjusted net income
(non-GAAP)
|
|
$
|
121
|
|
$
|
181
|
|
$
|
381
|
|
$
|
607
|
|
|
Third Quarter
|
|
Year-to-Date
|
|
|
2022
|
|
2021 (1)
|
|
2022
|
|
2021 (1)
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
|
1.01
|
|
$
|
1.52
|
|
$
|
3.38
|
|
$
|
7.54
|
Diluted EPS amounts
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges (2)
|
|
|
0.16
|
|
|
0.41
|
|
|
0.29
|
|
|
0.69
|
Other income / expense
(3)
|
|
|
0.10
|
|
|
(0.19)
|
|
|
0.26
|
|
|
(2.43)
|
Tax reserves charge
(4)
|
|
|
—
|
|
|
—
|
|
|
0.05
|
|
|
—
|
Adjusted diluted
earnings per share (non-GAAP)
|
|
$
|
1.27
|
|
$
|
1.74
|
|
$
|
3.98
|
|
$
|
5.80
|
|
Notes on Non-GAAP
Adjustments:
|
|
|
(1)
|
Non-GAAP results in the
third quarter and year-to-date periods of 2021 were affected by the
change in presentation of minority investments discussed above,
which
excluded $27 million of income ($20 million after tax or $0.19 per
share) in the third quarter and $44 million of income ($32 million
or $0.30 per share) year-to-date.
|
|
|
(2)
|
For the third quarter
of 2022, impairment and other charges included $17 million of
transformation consulting, $2 million of severance costs for the
upcoming closure of
a distribution center, and $1 million of acquisition integration
costs. For year-to-date 2022, impairment and other charges included
$27 million of transformation consulting,
$5 million of impairment of long-lived assets and right-of-use
assets and accelerated tenancy charges, $4 million of acquisition
integration costs, and $2 million of severance
costs related to the distribution center closure.
|
|
|
|
For the third quarter
and year-to-date periods of 2021, impairment and other charges
included $13 million and $52 million, respectively, of impairment
of long-lived assets
and right-of-use assets and accelerated tenancy charges associated
with the decision to exit Footaction stores, $30 million and $32
million, respectively, of impairment of
investments, and acquisition and integration costs of $14
million.
|
|
|
|
Also included in the
year-to-date period of 2021 is $4 million in lease-related
termination costs and charges of $2 million primarily related to
severance costs in connection
with the reorganization of certain support functions. Partially
offsetting these losses and charges was $7 million of additional
insurance recovery recorded in impairment
and other charges as it relates to the book value of property
losses recorded in 2020.
|
|
|
(3)
|
Other income / expense
for the third quarter of 2022 primarily consisted of a $15 million
loss on minority investments, primarily due to a change in fair
value of the
investment in Retailors, Ltd., a publicly-listed entity, partially
offset by an additional $1 million gain on the divestiture of the
Team Sales business that occurred in the
second quarter. The year-to-date 2022 amount includes $52 million
of losses on minority investments, primarily from Retailors, Ltd.,
a $19 million gain on the Team Sales
business divestiture, and $1 million of dividend income.
|
|
|
|
For the third quarter
and year-to-date 2021, other income included $27 million and $343
million, respectively, of gains on minority investments, primarily
related to the
fair value adjustment of Retailors, Ltd., as well as a higher
valuation on our investment in GOAT in the year-to-date period.
Other income also included $4 million of
insurance recoveries in the year-to-date period.
|
|
|
(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)
|
|
|
|
October 29,
|
|
October 30,
|
|
|
2022
|
|
2021
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
351
|
|
$
|
1,339
|
Merchandise
inventories
|
|
|
1,685
|
|
|
1,301
|
Other current
assets
|
|
|
302
|
|
|
253
|
|
|
|
2,338
|
|
|
2,893
|
Property and equipment,
net
|
|
|
897
|
|
|
860
|
Operating lease
right-of-use assets
|
|
|
2,449
|
|
|
2,619
|
Deferred
taxes
|
|
|
65
|
|
|
95
|
Goodwill
|
|
|
764
|
|
|
651
|
Other intangible
assets, net
|
|
|
424
|
|
|
235
|
Minority
investments
|
|
|
722
|
|
|
762
|
Other assets
|
|
|
103
|
|
|
96
|
|
|
$
|
7,762
|
|
$
|
8,211
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
522
|
|
$
|
578
|
Accrued and other
liabilities
|
|
|
455
|
|
|
498
|
Current portion of
long-term debt and obligations under finance leases
|
|
|
6
|
|
|
104
|
Current portion of
lease obligations
|
|
|
539
|
|
|
577
|
|
|
|
1,522
|
|
|
1,757
|
Long-term debt and
obligations under finance leases
|
|
|
448
|
|
|
456
|
Long-term lease
obligations
|
|
|
2,212
|
|
|
2,421
|
Other
liabilities
|
|
|
321
|
|
|
235
|
Total
liabilities
|
|
|
4,503
|
|
|
4,869
|
Total shareholders'
equity
|
|
|
3,259
|
|
|
3,342
|
|
|
$
|
7,762
|
|
$
|
8,211
|
FOOT LOCKER,
INC.
|
|
Store Count and
Square Footage
(unaudited)
|
|
Store activity is as
follows:
|
|
|
|
January 29,
|
|
|
|
|
|
October 29,
|
|
Relocations/
|
|
|
2022
|
|
Opened
|
|
Closed
|
|
2022
|
|
Remodels
|
Foot Locker
U.S.
|
|
802
|
|
21
|
|
52
|
|
771
|
|
20
|
Foot Locker
Europe
|
|
626
|
|
18
|
|
10
|
|
634
|
|
20
|
Foot Locker
Canada
|
|
95
|
|
1
|
|
6
|
|
90
|
|
1
|
Foot Locker
Pacific
|
|
94
|
|
1
|
|
—
|
|
95
|
|
10
|
Foot Locker
Asia
|
|
30
|
|
3
|
|
—
|
|
33
|
|
—
|
Kids Foot
Locker
|
|
410
|
|
21
|
|
18
|
|
413
|
|
8
|
Lady Foot
Locker
|
|
14
|
|
—
|
|
5
|
|
9
|
|
—
|
Champs
Sports
|
|
525
|
|
2
|
|
17
|
|
510
|
|
4
|
Footaction
|
|
41
|
|
—
|
|
30
|
|
11
|
|
—
|
Sidestep
|
|
86
|
|
1
|
|
6
|
|
81
|
|
—
|
WSS
|
|
98
|
|
10
|
|
—
|
|
108
|
|
4
|
atmos
|
|
37
|
|
4
|
|
2
|
|
39
|
|
3
|
Total
|
|
2,858
|
|
82
|
|
146
|
|
2,794
|
|
70
|
Selling and gross
square footage are as follows:
|
|
|
|
October 30, 2021
|
October 29, 2022
|
(in
thousands)
|
|
Selling
|
|
Gross
|
|
Selling
|
|
Gross
|
Foot Locker
U.S.
|
|
2,394
|
|
4,151
|
|
2,367
|
|
4,079
|
Foot Locker
Europe
|
|
1,038
|
|
2,194
|
|
1,132
|
|
2,337
|
Foot Locker
Canada
|
|
252
|
|
413
|
|
248
|
|
408
|
Foot Locker
Pacific
|
|
179
|
|
283
|
|
204
|
|
315
|
Foot Locker
Asia
|
|
109
|
|
191
|
|
126
|
|
233
|
Kids Foot
Locker
|
|
723
|
|
1,240
|
|
767
|
|
1,301
|
Lady Foot
Locker
|
|
21
|
|
48
|
|
15
|
|
26
|
Champs
Sports
|
|
1,922
|
|
3,007
|
|
1,879
|
|
2,940
|
Footaction
|
|
509
|
|
834
|
|
29
|
|
51
|
Sidestep
|
|
93
|
|
174
|
|
100
|
|
189
|
WSS
|
|
906
|
|
1,151
|
|
1,067
|
|
1,341
|
atmos
(1)
|
|
—
|
|
—
|
|
37
|
|
66
|
Total
|
|
8,146
|
|
13,686
|
|
7,971
|
|
13,286
|
|
(1)
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-third-quarter-results-updates-2022-outlook-301682405.html
SOURCE Foot Locker IR