NEW YORK, Nov. 17, 2017 /PRNewswire/ -- Foot Locker,
Inc. (NYSE: FL), the New
York-based specialty athletic retailer, today reported
financial results for its third quarter ended October 28, 2017.
Third Quarter Results
Net income for the Company's
third quarter ended October 28, 2017
was $102 million, or $0.81 per share, compared with net income of
$157 million, or $1.17 per share in the same period of
2016.
Third quarter comparable-store sales decreased 3.7
percent. Total sales decreased 0.8 percent, to $1,870 million this quarter, compared with sales
of $1,886 million for the
corresponding prior-year period. Excluding the effect of
foreign currency fluctuations, total sales for the third quarter
decreased 2.3 percent. The Company's gross margin rate
decreased to 31.0 percent of sales from 33.9 percent a year ago,
and the selling, general, and administrative expense rate increased
30 basis points to 19.7 percent of sales. Within SG&A,
the Company incurred $7 million of
hurricane-related costs, the majority of which related to damaged
or lost inventory.
The third quarter results included a $13
million pre-tax charge related to reducing and reorganizing
corporate and division staff. Excluding this charge, which
reduced after-tax earnings by 6 cents
per share, non-GAAP earnings were $0.87 per share, compared to non-GAAP earnings of
$1.13 per share in the comparable
period of 2016.
"The Company's results in the quarter were broadly in line with
our expectations," said Richard
Johnson, Chairman and Chief Executive Officer.
"Despite the highly promotional environment we still see in the
marketplace, the availability of premium product is gradually
improving compared to the first half of the year, and we believe we
can achieve, and perhaps modestly exceed, the top- and bottom-line
guidance we gave for the fourth quarter back in August."
Mr. Johnson continued, "The reduction and reorganization of our
corporate and division staff during the quarter, while a difficult
decision, was a critical step in positioning us for success as we
navigate through the tremendous disruption affecting our customers
and the retail industry in general. We are adjusting our
course proactively, including creating new initiatives with key
vendors and making critical investments in our digital platforms
and supply chain, to ensure that Foot Locker will continue to
thrive at the center of sneaker culture and, more broadly, youth
culture."
Lauren Peters, Executive Vice
President and Chief Financial Officer, added, "In addition to taking meaningful steps to
create an even more flexible and efficient organization, we
maintained our solid management of inventory in the third quarter,
which is enabling us to flow improving merchandise assortments into
the business for the holiday season. We also significantly
accelerated the pace of share repurchases in the quarter given the
value we perceived in the price of the Company's shares."
Year-To-Date Results
Net income for the Company's
first nine months of the year decreased to $333 million, or $2.55 per share on a GAAP basis, compared to net
income of $475 million, or
$3.50 per share, for the
corresponding period in 2016. Year-to-date sales were
$5,572 million, a decrease of 1.4
percent compared to sales of $5,653
million in the corresponding nine-month period of
2016. Year-to-date, comparable store sales decreased 2.9
percent, while total year-to-date sales, excluding the effect of
foreign currency fluctuations, decreased by 1.5 percent.
Year-To-Date Non-GAAP Adjustments
On a non-GAAP basis,
earnings per share for the nine-month period totaled $2.84, an 18 percent decrease compared to the
same period in 2016. In addition to the $13 million reorganization charge in the third
quarter of this year, the Company's results in the second quarter
included a $50 million pre-tax
litigation charge. Combined, these two charges reduced GAAP
earnings by 29 cents per share,
compared with non-GAAP items which increased GAAP earnings
4 cents per share in the first nine
months of 2016.
Financial Position
At October
28, 2017, the Company's merchandise inventories were
$1,315 million, 3.4 percent lower
than at the end of the third quarter last year. Using
constant currencies, inventory decreased 4.9 percent. The
Company's cash totaled $890 million,
while the debt on its balance sheet was $126
million. The Company spent $304
million to repurchase 8.69 million shares during the quarter
and paid a quarterly dividend of $0.31 per share for $38
million.
Store Base Update
During the third quarter, the
Company opened 12 new stores, remodeled or relocated 41 stores, and
closed 22 stores. As of October 28,
2017, the Company operated 3,349 stores in 23 countries in
North America, Europe, Australia, and New Zealand. In addition,
83 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. (EST) today, November 17, 2017, to review these results and
discuss the outlook for the remainder of 2017. This
conference call may be accessed live by dialing 1-800-763-5545
(U.S. and Canada) or +44
208-196-2877 (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 December 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
October 28, 2017 and October 29, 2016 (In millions,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter
|
|
|
Year-to-Date
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Sales
|
|
|
$
|
1,870
|
|
$
|
1,886
|
|
$
|
5,572
|
|
$
|
5,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
(1)
|
|
|
|
1,290
|
|
|
1,246
|
|
|
3,809
|
|
|
3,730
|
SG&A
|
|
|
|
368
|
|
|
366
|
|
|
1,078
|
|
|
1,077
|
Depreciation and
amortization
|
|
|
|
44
|
|
|
40
|
|
|
127
|
|
|
118
|
Income from
operations
|
|
|
|
168
|
|
|
234
|
|
|
558
|
|
|
728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Litigation and other
charges
|
|
|
|
13
|
|
|
6
|
|
|
63
|
|
|
6
|
Interest
(income)/expense, net
|
|
|
|
—
|
|
|
1
|
|
|
(1)
|
|
|
2
|
Other
income
|
|
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
|
(3)
|
Income before income
taxes
|
|
|
|
156
|
|
|
227
|
|
|
498
|
|
|
723
|
Income tax
expense
|
|
|
|
54
|
|
|
70
|
|
|
165
|
|
|
248
|
Net
income
|
|
|
$
|
102
|
|
$
|
157
|
|
$
|
333
|
|
$
|
475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
|
$
|
0.81
|
|
$
|
1.17
|
|
$
|
2.55
|
|
$
|
3.50
|
Weighted-average
diluted shares outstanding
|
|
|
|
126.4
|
|
|
134.0
|
|
|
130.3
|
|
|
135.7
|
Reconciliation of
GAAP to Non-GAAP Results:
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|
|
|
|
|
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|
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|
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter
|
|
Year-to-Date
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
After
|
|
|
|
|
After
|
|
|
|
|
After
|
|
|
|
|
After
|
|
|
|
|
|
Tax
|
|
EPS
|
|
Tax
|
|
EPS
|
|
Tax
|
|
EPS
|
|
Tax
|
|
EPS
|
GAAP net
income
|
|
$
|
102
|
|
$
|
0.81
|
|
$
|
157
|
|
$
|
1.17
|
|
$
|
333
|
|
$
|
2.55
|
|
$
|
475
|
|
$
|
3.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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After-tax
adjustments:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization costs
(2)
|
|
|
8
|
|
|
0.06
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
0.06
|
|
|
—
|
|
|
—
|
Litigation charge
(3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
0.23
|
|
|
—
|
|
|
—
|
Impairment charge
(4)
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
0.03
|
Tax benefit related
to intellectual
property reassessment
(5)
|
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
(0.07)
|
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
(0.07)
|
Non-GAAP
results
|
|
$
|
110
|
|
$
|
0.87
|
|
$
|
152
|
|
$
|
1.13
|
|
$
|
371
|
|
$
|
2.84
|
|
$
|
470
|
|
$
|
3.46
|
Footnotes:
|
|
|
(1)
|
Cost of sales
includes: the cost of merchandise, freight, distribution costs
(including related depreciation expense), shipping and handling,
occupancy, and buyers' compensation. Occupancy costs include rent,
common area maintenance charges, real estate taxes, general
maintenance, and utilities.
|
|
|
(2)
|
During the third
quarter of 2017, the Company reduced and reorganized its division
and corporate staff. The Company recorded a pre-tax charge of
$13 million ($8 million after-tax applying a marginal tax rate) or
$0.06 per diluted share. The substantial majority of the
charge is for severance and related costs.
|
|
|
(3)
|
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.
|
|
|
(4)
|
In the third quarter
of 2016, the Company recorded a $6 million impairment charge ($5
million after tax, applying a marginal tax rate) associated with
underperforming store assets of Runners Point and
Sidestep.
|
|
|
(5)
|
During the third
quarter of 2016, the Company's scheduled triennial reassessment of
the value of the intellectual property provided to our European
business by Foot Locker in the U.S. resulted in a $10 million tax
reduction.
|
FOOT LOCKER,
INC.
Condensed Consolidated Balance Sheets
(unaudited) (In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
28,
|
|
October
29,
|
|
|
2017
|
|
2016
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
890
|
|
$
|
865
|
Merchandise
inventories
|
|
|
1,315
|
|
|
1,361
|
Other current
assets
|
|
|
295
|
|
|
291
|
|
|
|
2,500
|
|
|
2,517
|
Property and
equipment, net
|
|
|
835
|
|
|
732
|
Deferred
taxes
|
|
|
164
|
|
|
171
|
Other
assets
|
|
|
316
|
|
|
274
|
|
|
$
|
3,815
|
|
$
|
3,694
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
243
|
|
$
|
215
|
Accrued and other
liabilities
|
|
|
326
|
|
|
327
|
Current portion of
capital lease obligations
|
|
|
—
|
|
|
1
|
|
|
|
569
|
|
|
543
|
Long-term debt and
obligations under capital leases
|
|
|
126
|
|
|
127
|
Other
liabilities
|
|
|
463
|
|
|
391
|
Total
liabilities
|
|
|
1,158
|
|
|
1,061
|
Total shareholders'
equity
|
|
|
2,657
|
|
|
2,633
|
|
|
$
|
3,815
|
|
$
|
3,694
|
FOOT LOCKER,
INC.
|
Store and Square
Footage
|
(unaudited)
|
|
|
Store activity is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
28,
|
|
|
October
28,
|
Relocations/
|
|
|
2017
|
Opened
|
Closed
|
2017
|
Remodels
|
Foot Locker
US
|
|
948
|
3
|
24
|
927
|
35
|
Foot Locker
Europe
|
|
622
|
14
|
7
|
629
|
39
|
Foot Locker
Canada
|
|
119
|
1
|
7
|
113
|
5
|
Foot Locker Asia
Pacific
|
|
95
|
4
|
2
|
97
|
8
|
Kids Foot
Locker
|
|
411
|
26
|
8
|
429
|
21
|
Lady Foot
Locker
|
|
124
|
—
|
16
|
108
|
—
|
Champs
Sports
|
|
545
|
4
|
3
|
546
|
14
|
Footaction
|
|
261
|
11
|
7
|
265
|
18
|
Runners
Point
|
|
122
|
1
|
2
|
121
|
—
|
Sidestep
|
|
86
|
—
|
3
|
83
|
—
|
SIX:02
|
|
30
|
2
|
1
|
31
|
—
|
Total
|
|
3,363
|
66
|
80
|
3,349
|
140
|
Selling and gross
square footage are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 28,
2017
|
|
October 28,
2017
|
(in
thousands)
|
|
Selling
|
Gross
|
|
Selling
|
Gross
|
Foot Locker
US
|
|
2,453
|
4,250
|
|
2,444
|
4,253
|
Foot Locker
Europe
|
|
907
|
1,971
|
|
928
|
2,021
|
Foot Locker
Canada
|
|
265
|
432
|
|
267
|
435
|
Foot Locker Asia
Pacific
|
|
134
|
220
|
|
139
|
230
|
Kids Foot
Locker
|
|
688
|
1,175
|
|
731
|
1,250
|
Lady Foot
Locker
|
|
167
|
280
|
|
146
|
245
|
Champs
Sports
|
|
1,930
|
2,978
|
|
1,949
|
3,015
|
Footaction
|
|
786
|
1,309
|
|
837
|
1,389
|
Runners
Point
|
|
162
|
267
|
|
154
|
264
|
Sidestep
|
|
81
|
135
|
|
76
|
131
|
SIX:02
|
|
61
|
101
|
|
63
|
106
|
Total
|
|
7,634
|
13,118
|
|
7,734
|
13,339
|
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-third-quarter-results-300558241.html
SOURCE Foot Locker, Inc.