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8-K - FOOT LOCKER, INC.c75729_8k.htm

EXHIBIT 99.1

 

 

N E W S  R E L E A S E

 

  Contact: John A. Maurer
    Vice President,
    Treasurer and Investor Relations
    Foot Locker, Inc.
    (212) 720-4092

 

FOOT LOCKER, INC. REPORTS THIRD QUARTER RESULTS

 

  Net Income of $104 Million, or $0.70 Per Share
  Non-GAAP EPS of $0.68, an 8 Percent Increase
  Comparable-Store Sales Increased 4.1 Percent

 

NEW YORK, NY, November 22, 2013 – Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, today reported financial results for its third quarter ended November 2, 2013.

 

Third Quarter Results

Net income for the Company’s third quarter ended November 2, 2013 was $104 million, or $0.70 per share, compared with net income of $106 million, or $0.69 per share, last year.

 

Third quarter comparable-store sales increased 4.1 percent. Total third quarter sales increased 6.4 percent, to $1,622 million this year, compared with sales of $1,524 million for the corresponding prior-year period. Excluding the effect of foreign currency fluctuations and Runners Point Group, total sales increased 1.3 percent.

 

Year-To-Date Results

Net income for the Company’s first nine months of the year increased to $308 million, or $2.04 per share, compared to net income of $293 million, or $1.90 per share, for the corresponding period in 2012. Earnings per share for the nine month period have increased 7.4 percent compared to the same period in 2012. Year-to-date sales were $4,714 million, an increase of 5.5 percent compared to sales of $4,469 million in the corresponding nine month period of 2012. Year-to-date comparable store sales increased 3.7 percent. Excluding the effect of foreign currency fluctuations, total sales year-to-date increased 5.3 percent

 

“It took a strong team effort to produce the solid top and bottom line results that we are reporting this morning,” said Ken C. Hicks, Chairman of the Board and Chief Executive Officer. “We have many strategies underway to drive our business, and the advances we have achieved are contributing to the current momentum we have towards reaching our long-range operational and financial goals.

 

“Most exciting for me, however, is that while we still have much progress to make on our existing initiatives, the team at Foot Locker, Inc. is continuing to identify new opportunities and develop ideas further in order to leverage our strengths and build an even stronger business. Some of these ideas deliver immediate impact, some will help improve results in the next several quarters, and yet others have the potential to drive our performance over the longer term.”

 

Non-GAAP Adjustment

During the third quarter, the Company incurred approximately $1 million, after tax, in costs related to the integration of Runners Point Group, and recorded a tax benefit of $3 million, or $0.02 per share, resulting

 

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

 

from the conclusion of a foreign tax audit which enabled a reduction of tax reserves established in prior periods. Excluding these adjustments, third quarter earnings were $0.68 per share on a non-GAAP basis, an increase of 8 percent compared to the $0.63 that the Company earned on a non-GAAP basis in the third quarter last year. The period last year included a similar tax benefit of $9 million, or $0.06 per share.

 

For the first nine months of 2013, non-GAAP net income was $310 million, a 10 percent increase over net income in the corresponding period last year. This net income represents $2.05 per share, an increase of 12 percent over the $1.83 per share earned in the corresponding period of 2012.

 

A reconciliation of GAAP to non-GAAP results is provided in the table below.

 

Financial Position

At November 2, 2013, the Company’s merchandise inventory was $1,316 million, 6 percent higher than at the end of the third quarter last year. Expressed in constant currencies and excluding Runners Point Group, inventory increased approximately 1.2 percent.

 

During the third quarter, the Company repurchased approximately 2 million shares of its common stock for $67 million, bringing the 2013 year-to-date repurchase activity to 4.85 million shares for $167 million.

 

The Company’s cash, cash equivalents, and short-term investments totaled $796 million, while the debt on its balance sheet was $140 million. The Company’s total cash position, net of debt, was $64 million lower than at the same time last year.

 

Store Base Update

During the third quarter, the Company opened 28 new stores, remodeled or relocated 118 stores, and closed 13 stores. The Company operated 3,510 stores in 23 countries in North America, Europe, Australia, and New Zealand as of November 2, 2013. In addition, 45 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 27 franchised Runners Point and Sidestep stores in Germany and Switzerland.

 

The Company is hosting a live conference call at 9:00 a.m. (EST) today to discuss these results and provide comments on the status of its current initiatives, and discuss trends in its business and the athletic industry. This conference call may be accessed live by dialing 888-446-3850 (U.S. and Canada) or 630-691-2739 (International) using the passcode 36067023, 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 download any necessary software. An archived replay of the conference call can be accessed approximately one hour following the end of the call at 888-843-7419 with the passcode 36067023#, through December 6, 2013. 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.

 

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), 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 2012 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.

 

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FOOT LOCKER, INC.

Condensed Consolidated Statements of Operations

(unaudited)

Periods ended November 2, 2013 and October 27, 2012

(In millions, except per share amounts)

 

   Third
Quarter
2013
   Third
Quarter
2012
  YTD 2013   YTD 2012
Sales  $1,622   $1,524   $4,714   $4,469 
                     
Cost of sales   1,085    1,019    3,163    2,999 
SG&A   340    319    969    931 
Depreciation and amortization   35    30    97    88 
Other charges   -    -    2    - 
Interest expense, net   2    1    4    3 
Other income   -    -    (3)   (1)
    1,462    1,369    4,232    4,020 
                     
Income before taxes  $160   $155   $482   $449 
Income tax expense   56    49    174    156 
Net income  $104   $106   $308   $293 
                     
Diluted EPS  $0.70   $0.69   $2.04   $1.90 
                     
Weighted-average diluted shares outstanding   149.5    153.9    151.2    154.0 
                     
   Third
Quarter
2013
   Third
Quarter
2012
  YTD 2013   YTD 2012
                     
Non- GAAP Results                    
                     
RPG acquisition/integration costs (1)  $1   $-   $4   $- 
                     
CCS store closure costs  $-   $-   $1   $- 
                     
Tax items (2)  $(3)  $(9)  $(3)  $(10)
                     
Net income, non-GAAP  $102   $97   $310   $283 
                     
Diluted EPS, non-GAAP  $0.68   $0.63   $2.05   $1.83 

 

Footnote to explain adjustments

 

   (1)Integration and transaction costs associated with the acquisition of Runners Point Group, after tax.
 (2)In the third quarter of 2013, the Company recorded a tax benefit of $3 million, or $0.02 per diluted share, related to the conclusion of a foreign tax audit that resulted in a reduction of tax reserves established in prior periods. Included in the third quarter of 2012 is a similar tax benefit of $9 million, or $0.06 per diluted share. Also included in the 2012 year-to-date results is a benefit of $1 million, or $0.01 per diluted share, which represented Canadian provincial tax rate changes.

 

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FOOT LOCKER, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(In millions)

 

   November 2,
2013
  October 27,
2012
Assets          
           
CURRENT ASSETS          
Cash, cash equivalents and short-term investments  $796   $853 
Merchandise inventories   1,316    1,240 
Other current assets   208    202 
    2,320    2,295 
           
Property and equipment, net   589    462 
Deferred tax assets   257    285 
Other assets   311    257 
   $3,477   $3,299 
           
Liabilities and Shareholders’ Equity          
           
CURRENT LIABILITIES          
Accounts payable  $310   $327 
Accrued and other liabilities   330    298 
Current portion of capital lease obligations   3    - 
    643    625 
           
Long-term debt and obligations under capital leases   137    133 
Other liabilities   231    252 
SHAREHOLDERS’ EQUITY   2,466    2,289 
   $3,477   $3,299 

 

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FOOT LOCKER, INC.

Store and Estimated Square Footage

(unaudited)

(Square footage in thousands)

 

     November 2,
2013
    February 2,
2013
    October 27,
2012
Foot Locker U.S.                 
Number of stores   1,056    1,072    1,090   
Gross square footage   4,321    4,311    4,378   
Selling square footage   2,507    2,515    2,558   
                  
Footaction                 
Number of stores   280    283    287   
Gross square footage   1,295    1,299    1,329   
Selling square footage   816    817    832   
                  
Lady Foot Locker                 
Number of stores   278    303    319   
Gross square footage   636    685    711   
Selling square footage   374    398    411   
                  
Kids Foot Locker                 
Number of stores   334    305    302   
Gross square footage   818    729    722   
Selling square footage   473    422    418   
                  
Champs Sports                 
Number of stores   543    539    540   
Gross square footage   2,887    2,861    2,870   
Selling square footage   1,896    1,876    1,882   
                  
CCS                 
Number of stores   0    22    22   
Gross square footage   0    51    51   
Selling square footage   0    34    34   
                  
International Stores                 
Number of stores   1,019    811    807   
Gross square footage   2,804    2,380    2,359   
Selling square footage   1,442    1,199    1,191   
                  
Total Stores Operated                 
Number of stores   3,510    3,335    3,367   
Gross square footage   12,761    12,316    12,420   
Selling square footage   7,508    7,261    7,326   
                  
Total Franchised Stores                 
Number of stores   72    42    40   
Gross square footage   142    96    91   
Selling square footage   96    65    62   

 

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