Foot Locker Q2 Earnings Nearly Halved on 2% Sales Gain

Foot Locker second quarter net income decreased to 28 cents per share, or $44 million, from 53 cents per share, or $82 million last year. Second quarter results in 2004 included an income tax benefit of $37 million, or 24 cents per share, related to discontinued operations.

Income from continuing operations decreased 3.4 percent to $0.28 per share, or $44 million, from $0.29 per share, or $45 million last year. Included in last year's results was a loss of $10 million, or $0.07 per share, related to the integration and operation of the 349-store Footaction chain that the Company acquired in May 2004. Also included in last year's income from continuing operations were income tax benefits related to resolution of U.S. and foreign income tax examinations, resulting in an effective tax rate that was significantly lower than the second quarter of this year. The Company's higher effective tax rate this year versus the second quarter of last year resulted in an unfavorable comparison of $0.07 per share.

For the second quarter period, sales increased 2.8% to $1,304 million this year compared with sales of $1,268 million in the year-ago period. Second quarter comparable-store sales increased 1.3%.

“Our second quarter earnings per share were below our initial expectations due to the disappointing financial results of our European business,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “The second quarter profit decline at Foot Locker Europe essentially offset the combined profit increase generated by our U.S. and other international divisions. We are particularly pleased with the second quarter financial results of our Champs Sports division and expect that our Footaction business will contribute meaningfully to our Company's financial results for the balance of this year.”

Year-to-Date Results

Year-to-date net income decreased to $0.65 per share, or $102 million, compared with $0.84 per share, or $130 million last year. Income from continuing operations increased 8.3 percent, to $0.65 per share, or $102 million, versus $0.60 per share, or $92 million last year. Year-to-date sales increased 9.3 percent to $2,681 million compared with sales of $2,454 million last year. Comparable-store sales increased 2.0 percent.

“Given the recent challenges in our European business, we have revised our outlook for the balance of the year. We currently expect that our earnings per share from continuing operations to increase 2 to 12 percent during our third and fourth quarters of 2005 as compared with the corresponding periods of the prior year. We believe it is prudent to maintain this outlook for the balance of this year until we see signs of a consistent improvement in our business trends in Europe.”

Capital Expenditure Update

The Company opened 27 new stores, remodeled/relocated 124 stores and closed 29 stores during the second quarter. At July 30, 2005, the Company operated 3,926 stores in 19 countries in North America, Europe and Australia. The Company also entered its 15th European nation during the second quarter with a new store in Switzerland.

For the full year, the Company increased its targeted store openings program from 100 to 110 new stores, including a total of 23 to be operated under the Footaction brand. The increased openings are expected to be funded under the Company's existing $170 million capital expenditure program.

                            FOOT LOCKER, INC.
             Condensed Consolidated Statements of Operations
                               (unaudited)
              Periods ended July 30, 2005 and July 31, 2004
                 (In millions, except per share amounts)


                                                   Second           Second
                                                   Quarter          Quarter
                                                     2005            2004

  Sales                                            $1,304           $1,268

  Cost of sales (1)                                   927              899
  Selling, general and administrative expenses        265              268
  Depreciation and amortization (1)                    41               38
  Restructuring charge                                 --                2
  Interest expense, net                                 3                4
  Other income                                         (3)              --
                                                    1,233            1,211
  Income from continuing operations before
   income taxes                                        71               57
  Income tax expense                                   27               12
  Income from continuing operations                    44               45

  Income from disposal of discontinued operations,
   net of tax                                          --               37
  Net income                                         $ 44             $ 82

  Diluted EPS:
  Income from continuing operations                 $0.28            $0.29
  Income from disposal of discontinued operations,
   net of tax                                          --             0.24
  Net income                                        $0.28            $0.53

  Weighted-average diluted shares outstanding       158.3            157.1