EX-99.1 2 c50016_ex99-1.htm c50016_ex99-1.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

EXHIBIT 99.1


N E W S    R E L EA S E

  Contact:   Peter D. Brown
      Senior Vice President,
      Chief Information Officer
      and Investor Relations
      Foot Locker, Inc.
      (212) 720-4254

FOOT LOCKER, INC. REPORTS SECOND QUARTER RESULTS

  • Second Quarter Net Loss is $0.12 Per Share
  • Second Quarter Sales Decreased 1.5 Percent
  • Second Quarter Comparable-Store Sales Decreased 7.3 Percent
  • Cash Position, Net of Debt, Increased $86 Million
  • Merchandise Inventory Decreased 1.6 Percent

NEW YORK, NY, August 22, 2007 — Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, today reported financial results for its second quarter ended August 4, 2007.

Second Quarter Results
The Company reported a net loss of $18 million, or $0.12 per share, for the second quarter ended August 4, 2007 compared to net income of $14 million, or $0.09 per share, last year. Second quarter sales decreased 1.5 percent, to $1,283 million this year compared with sales of $1,303 million for the corresponding prior year period. Second quarter comparable-store sales decreased 7.3 percent.

“Our second quarter results reflected lower than expected sales and the impact of a strategic decision to significantly accelerate the clearance of slow-selling merchandise inventory in our U.S. stores,” stated Matthew D. Serra, Foot Locker, Inc.’s Chairman and Chief Executive Officer. “This inventory clearance strategy resulted in markdowns increasing in our U.S. stores by $50 million, at cost, or $0.20 per share, versus the second quarter of last year. As a result, we are now better positioned to offer more exciting and compelling products for the fall season. At the same time, the division profit of our international stores increased approximately 20 percent from the same period last year, (excluding the $17 million pre-tax charge recorded in 2006 to write down long-lived assets pursuant to SFAS 144).”

Year-to-Date Results
For the first six months of the year, the Company reported a net loss of $1 million, or $0.01 per share, compared with net income of $73 million, or $0.47 per share, last year. Year-to-date sales decreased 2.6 percent to $2,599 million compared with sales of $2,668 million last year. Comparable-store sales decreased 6.2 percent.

Financial Position
At the end of the second quarter, the Company’s cash and short-term investments totaled $363 million. The Company’s cash position, net of debt, increased by $86 million from the same time last year. During the second quarter, the Company repurchased 1.1 million shares of its common stock for $24 million. For the first six months of the year, the Company repurchased 2.3 million shares for $50 million.

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Foot Locker, Inc. 112 West 34th Street, New York, NY 10120


The Company’s merchandise inventory at the end of the second quarter was 1.6 percent lower than at the end of the second quarter last year. Stated in constant currency dollars, the Company’s merchandise inventory decreased 3.2 percent versus last year. Merchandise inventory in the Company’s U.S. stores was approximately 4 percent lower than last year, with goods older than 12 months reduced from last year by approximately 40 percent. At the Company’s international stores, merchandise inventory was essentially flat with last year.

Store Base Update
During the first six months of the year, the Company opened 78 new stores, remodeled/relocated 129 stores and closed 115 stores. At August 4, 2007, the Company operated 3,905 stores in 20 countries in North America, Europe and Australia. In addition, seven franchised stores were operating in the Middle East. During the first week of the third quarter, the Company converted its Footquarters stores to Foot Locker and Champs Sports outlet stores.

During the next six months of 2007, the Company currently expects to open approximately 40 stores and, as previously announced, close 135 to 150 unproductive stores. Approximately 90 of the estimated store closings are expected to occur at or near their normal lease expiration and have minimal or no expense impact to the Company. Depending on the outcome of landlord negotiations, 50 to 60 of the stores are expected to close prior to normal lease expiration. The cash costs associated with closing these 135 to 150 stores are expected to be essentially offset by the cash benefits of the working capital reduction.

Mr. Serra continued, “Given the uncertainty of several factors that may affect our financial results, we are not providing a financial forecast for the balance of the year at this time. These uncertainties include the current challenging athletic retail environment in the U.S. and incremental costs associated with the closing of the additional stores. In addition, we will continue to assess the impact of the recent merchandise initiatives on the financial results of our domestic businesses during the fall 2007 season. This assessment may include an analysis of the recoverability of store long-lived assets pursuant to SFAS 144 that may result in a non-cash impairment charge.”

The Company is hosting a live conference call at 10:00 a.m. (ET) on Thursday, August 23, 2007 to discuss these results. This conference call may be accessed live from the Investor Relations section of the Foot Locker, Inc. website at http://www.footlocker-inc.com. The conference call will be available for webcast replay until 5:00 p.m. on Friday, September 7, 2007.

Disclosure Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, such things as future capital expenditures, expansion, strategic plans, 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 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), unseasonable weather, economic conditions worldwide, 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 plans effectively with regard to each of its business units, risks associated with foreign global sourcing, including political instability, changes in import regulations, and disruptions to transportation services and distribution. 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.

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FOOT LOCKER, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Periods ended August 4, 2007 and July 29, 2006
(In millions, except per share amounts)

  Second   Second  
  Quarter   Quarter  
  2007   2006  
Sales $ 1,283     $ 1,303  
               
Cost of sales   981       942  
Selling, general and administrative expenses   286       273  
Depreciation and amortization   44       44  
Impairment charge   --       17  
Interest expense, net   --       1  
Other expense   1       1  
    1,312       1,278  
Income (loss) before income taxes   (29 )     25  
Income tax expense (benefit)   (11 )     11  
Net income (loss) $ (18 )   $ 14  
               
Diluted EPS:              
Net income (loss) $ (0.12 )   $ 0.09  
               
Weighted-average diluted shares outstanding
 
 154.0       156.7  
 
 
 
  Year-To-Date     Year-To-Date  
  2007     2006  
Sales $ 2,599     $ 2,668  
               
Cost of sales   1,937       1,888  
Selling, general and administrative expenses   576       556  
Depreciation and amortization   87       87  
Impairment charge   --       17  
Interest expense, net   --       2  
Other expense   1       1  
    2,601       2,551  
Income (loss) before income taxes and cumulative effect of   (2 )     117  
       accounting change              
Income tax expense (benefit)   (1 )     45  
Income (loss) before cumulative effect of accounting change   (1 )     72  
Cumulative effect of accounting change, net of income tax   --       1  
Net income (loss) $ (1 )   $ 73  
               
Diluted EPS:              
Income (loss) before cumulative effect of accounting change $ (0.01 )   $ 0.46  
Cumulative effect of accounting change   --       0.01  
Net income (loss) $ (0.01 )   $ 0.47  
               
Weighted-average diluted shares outstanding   154.4       156.7  

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FOOT LOCKER, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(In millions)

    August 4,   July 29,
    2007   2006
Assets            
 
CURRENT ASSETS            
Cash, cash equivalents and short-term investments   $ 363   $ 318
Merchandise inventories     1,452     1,476
Other current assets     290     191
      2,105     1,985
 
Property and equipment, net     648     667
Deferred tax assets     134     214
Other assets     453     470
    $ 3,340   $ 3,336
 
Liabilities and Shareholders’ Equity            
 
CURRENT LIABILITIES            
Accounts payable   $ 368   $ 441
Accrued and other liabilities     254     237
Current portion of long-term debt and obligations            
    under capital leases     14     22
      636     700
 
Long-term debt and obligations under capital leases     216     249
Other liabilities     245     307
SHAREHOLDERS’ EQUITY     2,243     2,080
    $ 3,340   $ 3,336

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FOOT LOCKER, INC.
Store and Estimated Square Footage
(unaudited)
(Square footage in thousands)

    August 4,   July 29,   July 30,  
    2007    2006    2005  
Foot Locker U.S.              
   Number of stores       1,321       1,363       1,400      
   Gross square footage       5,344       5,501       5,690      
   Selling square footage       3,162       3,241       3,337      
 
Footaction              
   Number of stores       373       365       358      
   Gross square footage       1,735       1,721       1,705      
   Selling square footage       1,066       1,063       1,060      
 
Lady Foot Locker              
   Number of stores       546       550       554      
   Gross square footage       1,217       1,229       1,239      
   Selling square footage       689       693       693      
 
Kids Foot Locker              
   Number of stores       331       325       333      
   Gross square footage       801       789       804      
   Selling square footage       476       470       479      
 
Champs Sports              
   Number of stores       575       559       563      
   Gross square footage       3,127       3,063       3,105      
   Selling square footage       2,123       2,105       2,137      
 
Footquarters              
   Number of stores       32       --       --      
   Gross square footage       188       --       --      
   Selling square footage       169       --       --      
 
Foot Locker International              
   Number of stores       727       732       718      
   Gross square footage       2,108       2,099       2,057      
   Selling square footage       1,080       1,093       1,091      
 
Total Stores Operated              
   Number of stores       3,905       3,894       3,926      
   Gross square footage       14,520       14,402       14,600      
   Selling square footage       8,765       8,665       8,797      
 
Total Franchised Stores              
   Number of stores       7       --       --      
   Gross square footage       20       --       --      
   Selling square footage       14       --       --      

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