Foot Locker, Inc. sales in the fourth quarter sales slid 11.1% to $1.32 billion from $1.48 billion a year ago. Excluding the effect of foreign currency fluctuations, sales decreased 7.3%. Comparable-store sales decreased 7.3%. Income from continuing operations, before the non-cash impairment charges, store closing expenses and income tax valuation allowance adjustments, was $38 million, or 24 cents per share, this year, versus $24 million, or 15 cents per share, last year.
The company reported a net loss of $126 million, or 82 cents per share, in the fourth quarter compared with net income of $72 million, or 46 cents, a year ago. The company's results included non-cash impairment charges, store closing program costs and discontinued operations in both years, and an income tax valuation allowance adjustment last year that, in total, decreased net income in 2008 by $164 million, or $1.06 per share, and increased net income in 2007 by $48 million, or $0.31 per share.
“Our fourth quarter sales reflected a very challenging external environment, as consumer spending weakened and mall traffic declined,” stated Matthew D. Serra, Foot Locker, Inc.'s chairman and chief executive officer. “Despite the difficult selling climate, we generated a 60% increase in our adjusted income from continuing operations per share versus the fourth quarter of last year, due primarily to a significantly increased gross margin rate and lower operating expenses. Additionally, we ended the year with a strong balance sheet and our merchandise inventory is positioned well for 2009.”
Fiscal Year Financial Results
The company reported a net loss of $81 million, or $0.53 per share, for the full fiscal year in 2008 as compared with net income of $38 million, or $0.24 per share, in 2007. The company's results included non-cash impairment charges, store closing program costs and discontinued operations in both years, and an income tax valuation allowance adjustment in last year's results that, in total, decreased net income in 2008 by $185 million, or $1.20 per share, and increased net income in 2007 by $17 million, or $0.11 per share.
Excluding the non-cash impairment charges, store closing expenses and income tax valuation allowance adjustments, the company's income from continuing operations was $104 million, or $0.67 per share, this year, versus $55 million, or $0.35 per share, last year.
Sales for the full year were $5,237 million, compared with sales of $5,437 million for the corresponding prior year period. Excluding the effect of foreign currency fluctuations, total sales for the full year decreased 4.0%. Comparable-store sales decreased 3.2%.
Financial Position
At year end, the company's cash and short-term investments totaled $408 million. Its total cash position, net of debt, of $266 million was $6 million lower than last year reflecting the company's $145 million capital expenditure program, $93 million shareholder dividend payments and $103 million cash acquisition of CCS.
Merchandise inventory at year end was $1,117 million, which was $164 million, or 12.8%, less than at the end of last year.
Store Base Update
During the year, the company opened 64 stores and remodeled or relocated 230 stores. The company also closed 208 stores in 2008, most of which were unproductive. At January 31, 2009, the company operated 3,641 stores in 21 countries in North America, Europe and
2009 Focus
Given the challenging external environment, the company has taken several steps to enhance its ability to generate strong positive cash flow in 2009 and help ensure that it maintains a strong financial position. These steps include decreasing its capital expenditure program for 2009 to $100 million and reducing its operating expenses and merchandise inventory purchases to reflect the current sales environment.
The company's capital expenditure plan for 2009 provides the funds necessary to open approximately 25 new stores, remodel or relocate up to 150 stores, maintain its ongoing store maintenance program and undertake projects designed to keep the company's infrastructure current. The company may increase its capital expenditure program later in the year if business conditions warrant.
“We believe that planning our business conservatively is the most appropriate strategy for 2009, given the weak economic conditions that currently exist in the global marketplace,” stated Serra. “Due to the uncertain impact that the external environment may have on our business, we do not believe that it is appropriate to provide earnings guidance for 2009. We are confident, however, that we are positioned correctly for the current year and determined to meet the challenges that may lie ahead.”
