Foot Locker Q1 Earnings Jump Despite Comp Sales Dip

Foot Locker, Inc. reported that fiscal first quarter sales decreased 7.1% to $1.22 billion for the period ended May 2, compared with sales of $1.31 billion for the corresponding prior-year period. Excluding the effect of foreign currency fluctuations, total sales for the first quarter decreased 2.2% and comparable store sales decreased 2.4% for the period.

Net income was $31 million, or 20 cents per share, for the company's first quarter, compared with net income of $3 million, or 2 cents per share, in Q1 last year. First quarter results in 2008 included store closing expenses of $3 million, after-tax, or 2 cents per share, and a non-cash impairment charge of $15 million, after-tax, or 10 cents per share. Excluding those items, first quarter net income in 2008 was $21 million, or 14 cents per share.

“The 43 percent increase in our earnings per share versus our adjusted results last year reflects our ability to improve our gross margin rate and reduce our operating expenses, as our sales were affected by the difficult economic environment,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “The merchandise inventory repositioning strategy that we undertook over the past two years allowed us to achieve the 130 basis point increase in our gross margin rate versus the first quarter of last year. Our first quarter profit was also enhanced by our many expense initiatives that contributed to a $21 million decrease in our SG&A expenses compared to the prior-year comparable period.”

At the end of the first quarter, the company's cash and short-term investments totaled $431 million. The company's total cash position, net of debt, was $289 million, a $6 million improvement from the same time last year.

During the first quarter of 2009 Foot Locker completed a new, 4-year, $200 million revolving credit facility with its banks. The facility provides additional financial flexibility and includes a provision that would allow the Company to increase the size of the credit facility by $100 million, for a total of $300 million.

During the first quarter, Foot Locker, Inc. opened 16 new stores; remodeled or relocated 47 stores and closed 24 stores. At May 2, 2009, the retailer operated 3,633 stores in 21 countries in North America, Europe and Australia. In addition, 19 Foot Locker franchised stores were operating in the Middle East and South Korea.

                                   FOOT LOCKER, INC.
                     Condensed Consolidated Statements of Operations
                                     (unaudited)
                       Periods ended May 2, 2009 and May 3, 2008
                        (In millions, except per share amounts)
                                              First Quarter     First Quarter
                                                   2009              2008
    Sales                                        $1,216            $1,309
    Cost of sales                                   860               943
    Selling, general and administrative
     expenses                                       278               299
    Depreciation and amortization                    28                32
    Impairment charge and store closing
     expenses                                         -                19
    Interest expense, net                             2                 1
    Other income                                     (1)                -
                                                  1,167             1,294
    Income before income taxes                       49                15
    Income tax expense                               18                12
    Net income                                      $31                $3
    Diluted EPS:
    Net income                                    $0.20             $0.02


                 Reconciliation of Net Income from a GAAP-reported basis
                                to a non-GAAP basis
                                    (unaudited)
                       Periods ended May 2, 2009 and May 3, 2008
                        (In millions, except per share amounts)
                                              First Quarter     First Quarter
                                                   2009              2008
    Net income - GAAP basis                         $31                $3
    Additions:
       Impairment charge                              -                15
       Store closing costs                            -                 3
    Net income - non-GAAP basis                     $31               $21
    Net income per share - GAAP basis             $0.20             $0.02
    Additions:
       Impairment charge                              -              0.10
       Store closing costs                            -              0.02
    Net income per share - non-GAAP basis         $0.20             $0.14