NEW YORK, Nov. 20, 2020 /PRNewswire/ -- Foot Locker, Inc.
(NYSE: FL), the New York-based
specialty athletic retailer, today reported financial results for
its third quarter ended October 31,
2020.
Third Quarter Results
Net income for the Company's
third quarter of 2020 was $265
million, or $2.52 per share,
compared to net income of $125
million, or $1.16 per share in
the corresponding prior-year period. Included in these results are
the following pre-tax items: 1) a $190
million non-cash gain related to a higher valuation for one
of the Company's minority investments, 2) $3
million in costs related to the shutdown of the Runners
Point banner, and 3) $1 million for
costs incurred in connection with social unrest. Excluding these
items, non-GAAP earnings were $128
million, or $1.21 per share,
for the third quarter of 2020, as compared to non-GAAP earnings of
$122 million, or $1.13 per share, for the same period in 2019. A
reconciliation of GAAP to non-GAAP results is included in the
tables on the following pages.
Third quarter comparable-store sales increased by 7.7 percent.
Total third quarter sales increased 9.0 percent, to $2,106 million, compared to sales of $1,932 million for the corresponding prior-year
period. Excluding the effect of foreign exchange rate fluctuations,
total sales for the third quarter of 2020 increased by 7.7 percent.
The Company's gross margin rate decreased to 30.9 percent
from 32.1 percent a year ago, while the SG&A expense rate
decreased to 20.1 percent in the third quarter of 2020 from 21.3
percent a year ago.
"We delivered a strong top- and bottom-line performance in the
third quarter, underscoring the strength of our in-store and online
product assortments and the resilience of the Foot Locker, Inc.
brands," said Richard Johnson,
Chairman and Chief Executive Officer. "Although the back-to-school
selling season kicked in later than usual due to COVID-19-related
delays, momentum built as the quarter progressed, and we were
pleased with our customers' continued strong engagement across our
family of brands. Our teams again executed well in a dynamic
environment and did a tremendous job maintaining a seamless, safe,
and exciting shopping experience for our customers."
"With close to $2 billion in
liquidity, we believe our company is well prepared both financially
and operationally to continue navigating the ongoing pandemic,"
added Lauren Peters, Executive Vice
President and Chief Financial Officer. "Looking ahead, with over 10
percent of our store fleet temporarily closed due to COVID
restrictions, we are taking proactive measures for the upcoming
holiday period to deliver outstanding experiences both in our
stores and online, while ensuring the safety of our team members
and customers."
Year-To-Date Results
For the first nine months of the
year, the Company posted net income of $200
million, or $1.91 per share on
a GAAP basis, compared to net income of $357
million, or $3.23 per share,
for the corresponding period in 2019. On a non-GAAP basis,
earnings per share for the nine-month period totaled $1.26, compared to $3.32 per share earned in the same period in
2019. Year-to-date sales were $5,359
million, a decrease of 7.3 percent compared to sales of
$5,784 million in the corresponding
prior-year period. Year-to-date, comparable store sales
decreased by 7.1 percent and total year-to-date sales excluding the
effect of foreign currency fluctuations decreased by 7.5
percent.
Financial Position
As of October 31, 2020, the Company's merchandise
inventories were $1,193 million, 8.5
percent lower than at the end of the third quarter last year.
Using constant currencies, inventory decreased 9.3
percent.
The Company's cash totaled $1,393
million, while debt on its balance sheet was $131 million. During the quarter, the Company
repurchased 308 thousand shares for $10
million and paid a quarterly dividend of $0.15 per share for a total of $16 million.
Financial Outlook
As previously announced, the Company
withdrew its full-year 2020 guidance in March. Given the ongoing
uncertainty created by COVID-19, the Company is not providing
full-year 2020 guidance at this time.
Store Base Update
During the third quarter, the
Company opened 27 new stores, remodeled or relocated 8 stores, and
closed 95 stores, including 70 Runners Point stores. As of
October 31, 2020, the Company
operated 3,032 stores in 27 countries in North America, Europe, Asia,
Australia, and New Zealand.
In addition, 126 franchised Foot Locker stores were operating in
the Middle East.
The Company is hosting a live conference call at 9:00 a.m. ET today, November 20, 2020, to review these results and
provide an update on the business. 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 the Foot Locker, Inc. website at
https://www.footlocker-inc.com. Please log on to the website
15 minutes prior to the call in order 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 10149032 through December 4,
2020. A replay of the call will be also be available via
webcast from the same Investor Relations section of the Foot
Locker, Inc. website at https://www.footlocker-inc.com.
Disclosure Regarding Forward-Looking
Statements
This press release 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, the continued effect of the global pandemic, 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 February 1, 2020 filed on
March 27, 2020, and the Company's
Quarterly Report on Form 10-Q for the quarter ended August 1, 2020 filed on September 9, 2020. 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.
Condensed
Consolidated Statements of Operations
|
(unaudited)
|
|
Periods ended
October 31, 2020 and November 2, 2019
|
(In millions,
except per share amounts)
|
|
|
|
Third
Quarter
|
|
Third Quarter
Year-to-Date
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Sales
|
|
$
|
2,106
|
|
$
|
1,932
|
|
$
|
5,359
|
|
$
|
5,784
|
Cost of
sales
|
|
|
1,456
|
|
|
1,312
|
|
|
3,900
|
|
|
3,941
|
SG&A
|
|
|
424
|
|
|
411
|
|
|
1,127
|
|
|
1,220
|
Depreciation and
amortization
|
|
|
44
|
|
|
44
|
|
|
132
|
|
|
134
|
Impairment and other
charges
|
|
|
4
|
|
|
1
|
|
|
58
|
|
|
16
|
Income from
operations
|
|
|
178
|
|
|
164
|
|
|
142
|
|
|
473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense)
income, net
|
|
|
(2)
|
|
|
3
|
|
|
(5)
|
|
|
9
|
Other income,
net
|
|
|
193
|
|
|
4
|
|
|
197
|
|
|
8
|
Income before income
taxes
|
|
|
369
|
|
|
171
|
|
|
334
|
|
|
490
|
Income tax
expense
|
|
|
104
|
|
|
46
|
|
|
134
|
|
|
133
|
Net income
|
|
$
|
265
|
|
$
|
125
|
|
$
|
200
|
|
$
|
357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
|
2.52
|
|
$
|
1.16
|
|
$
|
1.91
|
|
$
|
3.23
|
Weighted-average
diluted shares outstanding
|
|
|
105.3
|
|
|
107.2
|
|
|
105.1
|
|
|
110.5
|
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. We have presented certain financial
measures 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.
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 and on the following pages.
Non-GAAP
Reconciliation
|
(unaudited)
|
|
Periods ended
October 31, 2020 and November 2, 2019
|
(In millions,
except per share amounts)
|
|
Reconciliation of
GAAP to non-GAAP results:
|
|
|
|
Third
Quarter
|
|
Third Quarter
Year-to-Date
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Pre-tax
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
$
|
369
|
|
$
|
171
|
|
$
|
334
|
|
$
|
490
|
Pre-tax adjustments
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges (1)
|
|
|
4
|
|
|
1
|
|
|
58
|
|
|
16
|
Other income
(2)
|
|
|
(190)
|
|
|
(4)
|
|
|
(190)
|
|
|
(4)
|
Adjusted income
before income taxes (non-GAAP)
|
|
$
|
183
|
|
$
|
168
|
|
$
|
202
|
|
$
|
502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
265
|
|
$
|
125
|
|
$
|
200
|
|
$
|
357
|
After-tax adjustments
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges, net of income tax benefit of
$-, $-, $9, and $4, respectively (1)
|
|
|
4
|
|
|
1
|
|
|
49
|
|
|
12
|
Other income, net of
income tax expense of $50, $-, $50,
and $- million, respectively (2)
|
|
|
(140)
|
|
|
(4)
|
|
|
(140)
|
|
|
(4)
|
Tax (benefit) charge
related to revaluation of certain
intellectual property rights (3)
|
|
|
(1)
|
|
|
—
|
|
|
24
|
|
|
—
|
U.S. tax reform
(4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
Adjusted net income
(non-GAAP)
|
|
$
|
128
|
|
$
|
122
|
|
$
|
133
|
|
$
|
367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter
|
|
Third Quarter
Year-to-Date
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
$
|
2.52
|
|
$
|
1.16
|
|
$
|
1.91
|
|
$
|
3.23
|
Diluted EPS amounts
excluded from GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment and other
charges (1)
|
|
|
0.03
|
|
|
0.01
|
|
|
0.45
|
|
|
0.11
|
Other income
(2)
|
|
|
(1.33)
|
|
|
(0.04)
|
|
|
(1.33)
|
|
|
(0.04)
|
Tax (benefit) charge
related to revaluation of certain
intellectual property rights (3)
|
|
|
(0.01)
|
|
|
-
|
|
|
0.23
|
|
|
-
|
U.S. tax reform
(4)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
0.02
|
Adjusted diluted
earnings per share (non-GAAP)
|
|
$
|
1.21
|
|
$
|
1.13
|
|
$
|
1.26
|
|
$
|
3.32
|
|
Notes on Non-GAAP
Adjustments:
|
(1) Included
with this caption are impairment charges and various charges, as
follows:
|
|
|
|
Third
Quarter
|
|
Third Quarter
Year-to-Date
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Impairment and
other charges (pre-tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and losses
related to social unrest
|
|
$
|
1
|
|
|
-
|
|
$
|
19
|
|
$
|
-
|
Runners Point
shutdown
|
|
|
3
|
|
|
-
|
|
|
19
|
|
|
-
|
Impairment
|
|
|
-
|
|
|
-
|
|
|
15
|
|
|
-
|
Eastbay
reorganization
|
|
|
-
|
|
|
-
|
|
|
3
|
|
|
-
|
Pension
reformation
|
|
|
-
|
|
|
1
|
|
|
2
|
|
|
3
|
SIX:02
shutdown
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
13
|
|
|
$
|
4
|
|
$
|
1
|
|
$
|
58
|
|
$
|
16
|
|
Cost and losses
related to social unrest represented inventory losses, damages to
store property, repairs, and other costs incurred in connection
with the riots that affected certain parts of the United States and
Canada during the second quarter of 2020. During the third quarter,
social unrest continued and resulted in an additional loss of $1
million. For the thirty-nine weeks ended October 31, 2020, the
charge represented inventory losses of $15 million, damages to
store property of $2 million, repairs and other costs of $2
million.
|
(2) The Company
recorded a non-cash gain of $190, or $140 million after-tax, during
the thirteen weeks ended October 31, 2020. This gain was
related to one of our minority investments that is measured using
the fair value measurement alternative, which received additional
funding at a higher valuation than the initial
investment.
|
During the thirteen
weeks ended November 3, 2019, the Company recognized a gain of $4
million in connection with the exchange of a note for a
distribution center lease and related fixed assets. The tax
expense was fully offset by the release of a valuation
allowance.
|
(3) During the
first quarter of 2020, the Company recorded a $27 million tax
charge related to the revaluation of certain intellectual property
rights, pursuant to a non-U.S. advance pricing agreement. Due
to changes in the financial outlook, the Company reversed $2
million and $1 million during the second and third quarters of
2020, respectively, of the revaluation charge.
|
(4) In
connection with U.S. tax reform, the Company recorded a charge of
$2 million for the thirty-nine weeks ended
November 2, 2019. The charge reflected an adjustment to
U.S. tax on foreign income.
|
Condensed
Consolidated Balance Sheets
|
(unaudited)
|
(In
millions)
|
|
|
|
October 31,
|
|
November 2,
|
|
|
2020
|
|
2019
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,393
|
|
$
|
744
|
Merchandise
inventories
|
|
|
1,193
|
|
|
1,304
|
Other current
assets
|
|
|
237
|
|
|
299
|
|
|
|
2,823
|
|
|
2,347
|
Property and
equipment, net
|
|
|
773
|
|
|
814
|
Operating lease
right-of-use assets
|
|
|
2,752
|
|
|
2,956
|
Deferred
taxes
|
|
|
69
|
|
|
93
|
Other
assets
|
|
|
601
|
|
|
411
|
|
|
$
|
7,018
|
|
$
|
6,621
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
514
|
|
$
|
396
|
Accrued and other
liabilities
|
|
|
451
|
|
|
333
|
Current portion of
obligations under finance leases
|
|
|
2
|
|
|
-
|
Current portion of
lease obligations
|
|
|
575
|
|
|
508
|
|
|
|
1,542
|
|
|
1,237
|
Long-term debt and
obligations under finance leases
|
|
|
129
|
|
|
122
|
Long-term lease
obligations
|
|
|
2,514
|
|
|
2,719
|
Other
liabilities
|
|
|
181
|
|
|
116
|
Total
liabilities
|
|
|
4,366
|
|
|
4,194
|
Total shareholders'
equity
|
|
|
2,652
|
|
|
2,427
|
|
|
$
|
7,018
|
|
$
|
6,621
|
Store Count and
Square Footage
|
(unaudited)
|
|
Store activity is
as follows:
|
|
|
|
February 1,
|
|
|
|
|
|
October 31,
|
|
Relocations/
|
|
|
2020
|
|
Opened
|
|
Closed
|
|
2020
|
|
Remodels
|
Foot Locker
U.S.
|
|
867
|
|
18
|
|
9
|
|
876
|
|
15
|
Foot Locker
Europe
|
|
636
|
|
7
|
|
15
|
|
628
|
|
7
|
Foot Locker
Canada
|
|
105
|
|
—
|
|
2
|
|
103
|
|
—
|
Foot Locker
Pacific
|
|
91
|
|
1
|
|
—
|
|
92
|
|
2
|
Foot Locker
Asia
|
|
14
|
|
3
|
|
—
|
|
17
|
|
—
|
Kids Foot
Locker
|
|
431
|
|
2
|
|
7
|
|
426
|
|
7
|
Lady Foot
Locker
|
|
46
|
|
—
|
|
7
|
|
39
|
|
—
|
Champs
Sports
|
|
536
|
|
8
|
|
6
|
|
538
|
|
4
|
Footaction
|
|
245
|
|
2
|
|
7
|
|
240
|
|
7
|
Runners
Point
|
|
81
|
|
1
|
|
82
|
|
—
|
|
—
|
Sidestep
|
|
77
|
|
8
|
|
12
|
|
73
|
|
1
|
Total
|
|
3,129
|
|
50
|
|
147
|
|
3,032
|
|
43
|
Selling and gross
square footage are as follows:
|
|
|
|
February 1,
2020
|
October 31, 2020
|
(in
thousands)
|
|
Selling
|
|
Gross
|
|
Selling
|
|
Gross
|
Foot Locker
U.S,
|
|
2,403
|
|
4,191
|
|
2,449
|
|
4,283
|
Foot Locker
Europe
|
|
1,016
|
|
2,181
|
|
1,013
|
|
2,172
|
Foot Locker
Canada
|
|
263
|
|
432
|
|
251
|
|
413
|
Foot Locker
Pacific
|
|
148
|
|
240
|
|
152
|
|
245
|
Foot Locker
Asia
|
|
42
|
|
76
|
|
59
|
|
107
|
Kids Foot
Locker
|
|
740
|
|
1,278
|
|
740
|
|
1,277
|
Lady Foot
Locker
|
|
66
|
|
110
|
|
56
|
|
93
|
Champs
Sports
|
|
1,930
|
|
2,999
|
|
1,938
|
|
3,013
|
Footaction
|
|
777
|
|
1,317
|
|
750
|
|
1,233
|
Runners
Point
|
|
105
|
|
185
|
|
—
|
|
—
|
Sidestep
|
|
75
|
|
137
|
|
84
|
|
151
|
Total
|
|
7,565
|
|
13,146
|
|
7,492
|
|
12,987
|
Contact:
James R. Lance
Vice President,
Corporate Finance and Investor Relations
Foot Locker, Inc.
(212) 720-4600
View original
content:http://www.prnewswire.com/news-releases/foot-locker-inc-reports-2020-third-quarter-results-301177793.html
SOURCE Foot Locker, Inc.