Foot Locker’s Q4 Net Soars on 7.9 Percent Comp Gain

Foot Locker, Inc. reported that excluding non-recurring charges in both periods, earnings rose 32.1 percent in the fourth quarter. With the benefit of an extra week, total fourth quarter sales increased
14.0 percent, to $1.71 billion this year, compared with sales of $1.5
billion for the corresponding prior-year period.  Comparable-store sales increased 7.9 percent.

Foreign exchange rate
fluctuations were not a material factor in the quarter.

The company’s fiscal year ended on Feb. 2, 2013, reflecting a 14-week fourth quarter and 53-week year, compared to the 13-week and 52-week periods in fiscal 2011. The additional week is not included in comparable store sales results for the quarter or the year.

The company reported net income of $104 million, or 68 cents per share, for the latest quarter. These results included an after-tax charge of $7 million, or cents per share, for the impairment of certain tangible and intangible assets related to the company’s CCS division. In the 13-week period a year ago, the company reported net income of $81 million, or 53 cents per share, which included an after-tax charge of $3 million, or 2 cents per share, for the impairment of certain intangible assets.

Excluding the charges in both years, fourth quarter non-GAAP net income was $111 million, or $0.73 per share, in 2012, versus $84 million, or 55 cents per share, in 2011.  The extra week in this year’s fourth quarter results contributed $14 million to net income, or 9 cents per share.   Excluding this benefit, non-GAAP net income was $0.64 per share.

Fiscal Year Results

For fiscal year 2012, which included 53 weeks, the company reported net income of $397 million, or $2.58 per share. These results included the fourth quarter after-tax charge of $7 million.  In the 52 weeks last year, the company reported net income of $278 million, or $1.80 per share, including the net charge of $3 million after-tax.

Excluding the impairment charges in both years, one-time tax benefits totaling 7 cents per share in 2012, and the benefit from the 53rd week, full-year non-GAAP net income was $380 million in 2012, or $2.47 per share, an increase of 36 percent over the $1.82 per share recorded in 2011.

Total sales increased 9.9 percent in 2012 to $6,182 million, compared with sales of $5,623 million last year.   Excluding the effect of foreign currency fluctuations, total sales for the full year increased 11.4 percent.  Comparable-store sales increased 9.4 percent in 2012.

“With the momentum we built from executing our strategic initiatives, the team at Foot Locker, Inc. was able to drive our sales and  profits substantially higher than last year’s record results,” said Ken C. Hicks, Chairman of the Board and Chief Executive Officer of Foot Locker, Inc.  “We believe that we can continue to build on this momentum and deliver a double digit percentage earnings per share gain for full-year 2013, compared to our 2012 non-GAAP results of $2.47 per share.”

“Our team is focused on consistently improving our financial and operational performance,” added Lauren B. Peters, Executive Vice President and Chief Financial Officer.  “Our success in 2012 can be seen in such productivity measures as the 14.2 percent return on invested capital and the $443 in sales per gross square foot that we achieved.”

Financial Position

The company’s merchandise inventory at February 2, 2013 was $1,167 million, which was $98 million, or 9.2 percent, higher than at the end of last year.   The increase was primarily attributable to the 53rd week, during which the company brought in additional inventory to position itself for February sales.  On a comparable week basis, inventory was approximately flat.

At year-end 2012, the company’s cash and short-term investments totaled $928 million, while the debt on its balance sheet was $133 million. The company’s total cash position, net of debt, was $79 million higher than at the same time last year.

During the fourth quarter of 2012, the company repurchased approximately 1 million shares of its common stock for $35 million.  For the full year, the company repurchased 4 million shares for approximately $129 million.

As announced in February, the company’s financial position has enabled it to undertake three key capital allocation initiatives in 2013: an 11 percent increase in its quarterly dividend to 20 cents per share; a new $600 million share repurchase program, replacing its previous $400 million program; and an increase in capital expenditures to $220 million, from the $163 million spent in 2012.

Store Base Update

The company opened 85 new stores, remodeled or relocated 198 stores, and closed 119 stores during fiscal 2012.  At February 2, 2013, the company operated 3,335 stores in 23 countries in North America, Europe, Australia, and New Zealand.  In addition, 42 franchised stores were operating in the Middle East and South Korea.