Foot Locker Posts Flat Net; Plans New Retail Chain

Foot Locker, Inc. reported that net income per diluted share was flat to last year at 42 cents. Net income slipped slightly to $65 million in the quarter from $66 million last year. Last year's results reflected revisions in estimates to discontinued reserves and a favorable income tax settlement totaling a penny per share, or $1 million, that was included in discontinued operations. Income from continuing operations for the third quarter of 2006 was 42 cents per share, or $65 million, compared to 41 cents per share, or $65 million last year.

For the third quarter period, sales increased 1.6%, to $1,430 million this year compared with sales of $1,408 million in the year-ago period. Third quarter comparable-store sales decreased 0.3%.

Year-to-Date Results

Year-to-date net income was 88 cents per share, or $138 million, compared to $1.07 per share, or $168 million last year. This year's results include a non-cash impairment charge recorded during the second quarter of 8 cents per share, or $12 million after tax, to write down long-lived assets at the company's European operation, pursuant to SFAS No. 144. Year-to-date income from continuing operations before this non-cash impairment charge was 96 cents per share, or $149 million, as compared to $1.06 per share, or $167 million last year.

Year-to-date sales increased 0.2% to $4,098 million compared with sales of $4,089 million last year. Comparable-store sales decreased 0.4%.

“The company's earnings per share for the third quarter were slightly higher than our expectation going into the period,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “While our comparable-store sales continued to be negatively affected by a challenging athletic retail market in Europe, we were able to stabilize our earnings in this region versus the comparable period of last year and capitalize on business opportunities in other areas where we operate.”

Mr. Serra continued, “For the fourth quarter of 2006, we continue to expect our earnings to increase several cents per share versus the same quarter last year. Based on our actual third quarter results and current outlook for the fourth quarter, we have raised our earnings per share from continuing operations expectation for the full year of 2006 to be in the range of $1.58 to $1.65 before the non-cash charge ($1.50 to $1.57 after the non-cash charge).”

Business Update

During the third quarter, the company opened 57 new stores, remodeled/relocated 49 stores and closed 16 stores. At October 28, 2006 the company operated 3,935 stores in 20 countries in North America, Europe and Australia. In addition, three Foot Locker franchised stores are currently operating in the Middle East.

The company plans to open a new retail format, which will be aimed at selling value-priced family footwear under the “Footquarters” brand name. Approximately 30 stores will be opened during the spring season of 2007, with a further rapid expansion plan possible thereafter.

Foot Locker, Inc. also plans to open its first “Champs Sports Just Hats” store in November 2006, selling athletic hats, located in the Miami International Mall.

Financial Position/Dividend Increase

The company ended the third quarter with cash and short-term investments totaling $263 million. During the third quarter, the company repurchased $38 million of its 8.5 percent bonds, due in 2022, at a $2 million discount to face value.

On November 15, 2006, the company's Board of Directors increased Foot Locker, Inc.'s quarterly cash dividend 39 percent from its previous amount to $0.125 per share, which is equivalent to an annualized rate of $0.50 per share. The increased dividend will be payable February 2, 2007 to shareholders of record on January 19, 2007.

                              FOOT LOCKER, INC.
               Condensed Consolidated Statements of Operations
                                 (unaudited)
             Periods ended October 28, 2006 and October 29, 2005
                   (In millions, except per share amounts)

                                                 Third Quarter   Third Quarter
                                                       2006            2005
    Sales                                             $1,430          $1,408

    Cost of sales                                      1,008             978
    Selling, general and administrative expenses         284             280
    Depreciation and amortization                         44              46
    Interest expense, net                                  1               2
    Other expense (income)                                (8)            ---
                                                       1,329           1,306
    Income from continuing operations before
     income taxes                                        101             102
    Income tax expense                                    36              37
    Income from continuing operations                     65              65
    Income from disposal of discontinued
     operations, net of tax                              ---               1
    Net income                                           $65             $66

    Diluted EPS:
    Income from continuing operations                  $0.42           $0.41
    Income from disposal of discontinued
     operations, net of tax                              ---            0.01
    Net income                                         $0.42           $0.42

    Weighted-average diluted shares outstanding        156.8           157.4