Foot Locker, Inc. returned to profitability in the fourth quarter after hefty charges weighed down results in 2008. Excluding special charges, earnings reached to $39 million, or 24 cents per share in the fourth quarter ended Jan. 30, even with $39 million, or 25 cents, a year ago. Sales inched up 0.6%, to $1.33 billion from $1,317 million. Excluding the effect of foreign currency fluctuations, sales decreased 2.9%. Comps decreased 2.3%.
Net earnings in the latest quarter was $23 million, or 14 cents per share, for
the fourth quarter this year, after including $16 million, after tax, or 10
cents per share, of inventory write-downs, corporate restructuring charges, and
an income tax adjustment. In the year-ago period. In the year-ago period, the
company reported a net loss of $125 million, or 81 cents per share, after
including non-cash impairment charges of $164 million, after tax, or $1.06 per
share.
The company took several initial steps during the fourth quarter as part of a
new comprehensive strategic plan that Foot Locker, Inc. will initiate in 2010.
* Consolidated its Foot Locker, Lady Foot Locker, Kids Foot
Locker and Footaction operations under one management structure
* Closed 106 underproductive stores
* Eliminated 120 corporate and divisional field and home
office positions
* Changed its merchandise aging standard to be aligned with
the company’s new apparel strategy
The impact of these actions on the company’s fourth quarter results is outlined
in the accompanying financial statements.
“We experienced an improving sales trend in both our U.S. and
international operations as we progressed through the fourth quarter, including
a comparable-store sales increase for the month of January that has continued
through the month of February,” stated Ken C. Hicks, Chairman of the Board
and Chief Executive Officer of Foot Locker, Inc. “I am pleased with
our operational execution during the quarter as we managed our inventories
effectively and maintained tight expense controls. This, coupled with the
strategic steps that we took during the fourth quarter, position us well as we
head into 2010 and focus on driving both the near- and long-term growth of our
business.”
Fiscal Year Financial Results
For the fiscal year, the company reported net income of $48 million, or $0.30
per share, including an inventory write-down, corporate restructuring charges,
the write-down of long-lived assets, and an income tax adjustment that total
$38 million, after-tax, or $0.24 per share. Excluding the charges,
year-to-date net income was $86 million, or $0.54 per share.
The company reported a net loss last year of $80 million, or $0.52 per share,
which included impairment charges and store closing expenses of $185 million,
after tax, or $1.20 per share. Before the impairment and other charges,
net income was $105 million, or $0.68 per share, in the 2008 fiscal year.
For the full year, sales decreased 7.3% to $4,854 million compared with sales
of $5,237 million last year. Excluding the effect of foreign currency
fluctuations, total sales for the full year decreased 6.1%. Comparable-store
sales decreased 6.3%.
Financial Position
During the past 12 months the company generated $468 million of positive cash
flow before capital expenditures, pension contributions and shareholder
dividends. At year end, the company’s cash and short-term investments
totaled $589 million. The company’s total cash position, net of debt, of
$451 million was $185 million higher than last year. Merchandise
inventory at year end was $1,037 million, which was $83 million, or 7.4%, less
than at the end of last year.
On February 16, 2010, the Board of Directors of Foot Locker, Inc. approved the
extension of the company’s 2007 common share repurchase program for an
additional three years in the amount of $250 million.
Store Base Update
During the year, the company opened 38 stores and remodeled or relocated 158
stores. The company also closed a total of 179 stores in 2009, most of
which were unproductive. At January 30, 2010, the company operated 3,500
stores in 21 countries in North America, Europe and Australia. In
addition, 22 franchised stores are currently operating in the Middle East and
South Korea.
Condensed Consolidated Statements of Operations
(unaudited)
Periods ended January 30, 2010 and January 31, 2009
(In millions, except per share amounts)
Fourth Quarter 2009 Fourth Quarter 2008
------------------- -------------------
Non-GAAP, Non-GAAP,
As As
GAAP Adjustments Adjusted GAAP Adjustments Adjusted
---- ----------- -------- ---- ----------- --------
Sales $1,325 $- $1,325 $1,317 $- $1,317
Cost of sales(1) 958 (14) 944 939 - 939
Selling, general
and
administrative
expenses 295 - 295 289 - 289
Depreciation and
amortization 27 - 27 33 - 33
Impairment/other
charges(2) 5 (5) - 236 (236) -
Other (income) (1) - (1) (1) - (1)
Interest expense,
net 2 - 2 1 - 1
----- ----- ----- ----- ----- -----
1,286 (19) 1,267 1,497 (236) 1,261
----- ----- ----- ----- ----- -----
Income (loss)
from continuing
operations
before income
taxes 39 19 58 (180) 236 56
Income tax expense
(benefit)(3) 16 3 19 (56) 72 16
Income (loss)
from continuing
operations 23 16 39 (124) 164 40
Discontinued
operations, net
of tax - - - (1) - (1)
----- ----- ----- ----- ----- -----
Net income (loss) $23 $16 $39 $(125) $164 $39
===== ===== ===== ===== ===== =====
Diluted EPS:
------------
Income (loss)
from continuing
operations $0.14 $0.10 $0.24 $(0.81) $1.06 $0.25
Discontinued
operations, net
of tax - - - - - -
----- ----- ----- ----- ----- -----
Net income
(loss) $0.14 $0.10 $0.24 $(0.81) $1.06 $0.25
===== ===== ===== ===== ===== =====
Weighted-average
diluted shares
outstanding 156.9 - 156.9 154.1 - 155.1
Footnotes to explain adjustments
(1) 2009 amount relates to an inventory write-down to meet the Company’s new aging standard.
(2) 2009 amount reflects costs of organizational changes related to its Lady Foot Locker business and corporate staff.
2008
amount reflects charges to write-down long-lived assets of the
Company’s U.S. store operations and the write-down of goodwill.
(3) 2009 and 2008 amounts reflect the income tax effect of the pre-tax adjustments highlighted above.
2009 amount includes the effect of a change in Canadian income tax rates on the Company’s deferred tax benefits.
