Foot Locker Inc. reported earnings and sales that came in well above pandemic-impacted year-ago levels as well as easily ahead of Wall Street’s targets.

First Quarter Results
The company reported a net income of $202 million, or $1.93 per share, for the 13 weeks ended May 1, 2021, as compared with a net loss of $110 million, or $1.06 per share, for the corresponding prior-year period. On a non-GAAP basis, the company earned $1.96 per share, versus a loss of $0.67 per share in the first quarter of 2020. Wall Street’s consensus estimate had been Street $1.05 per share.

As compared to the first quarter of 2019, earnings per share increased 27.0 percent from the $1.52 per share earned in that period. On a non-GAAP basis, earnings per share increased 28.1 percent from the $1.53 per share earned in the first quarter of 2019.

First-quarter comparable-store sales increased by 80.3 percent.

Total sales increased by 83.1 percent, to $2,153 million in the first quarter of 2021, compared with sales of $1,176 million in the same period last year. Wall Street’s consensus estimate had been $1.86 billion. Excluding the effect of foreign exchange rate fluctuations, total sales for the first quarter increased by 79.4 percent. As compared to the first quarter of 2019, total sales increased 3.6 percent, and 2.4 percent excluding the effect of foreign exchange rate fluctuations.

“I am extremely pleased with the strength of our performance in the first quarter, compared not only to last year’s heavily COVID impacted the first quarter, but also relative to the first quarter of 2019. Against the ongoing challenges of pandemic-related store closures in Europe and Canada and U.S. ports congestion, our top and bottom-line results were nothing short of exemplary,” said Richard Johnson, Chairman and Chief Executive Officer. “Our merchandise offering resonated very well with our customers, driving strength in our stores and continued momentum in our digital business. With strong product tailwinds, we remain optimistic about our category and our ability to drive long-term growth, profitability and shareholder value.”

“The freshness of our inventory, coupled with robust demand across our assortment, resulted in significantly less promotional activity during the first quarter, driving gross margin expansion and improved inventory turns,” added Andrew Page, Executive Vice President and Chief Financial Officer. “At the same time, we continued to exercise discipline with expense management while strategically investing in our business. Importantly, the underlying health of our business and financial position are strong, enabling us to continue advancing our strategic initiatives.”

Non-GAAP Adjustments
During the first quarter of 2021, the company recorded adjustments to earnings. The items included: 1) a $2 million charge related to the impairment of one of the company’s minority investments; and 2) charges of $2 million primarily related to severance costs in connection with the reorganization of certain support functions.

Financial Position
At May 1, 2021, the company’s merchandise inventories were $1,021 million, 30.0 percent lower than at the end of the first quarter last year. Using constant currencies, inventory decreased by 32.7 percent.

At quarter-end, the company’s cash and cash equivalents totaled $1,963 million, while the debt on its balance sheet was $109 million. The company’s total cash position, net of debt, was $1,293 million higher than at the same time last year. During the first quarter of 2021, the company spent $34 million to repurchase 620,544 shares, returning a total of $55 million to shareholders through its share repurchase program and dividends. In addition, the company invested $51 million in its store fleet, digital platforms, supply chain and logistics capabilities, and other infrastructure.

Store Base Update
During the first quarter, the company opened 12 new stores, remodeled or relocated 15 stores, and closed 58 stores. As of May 1, 2021, the company operated 2,952 stores in 27 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 131 franchised Foot Locker stores were operating in the Middle East.

The company announced today that it is taking action, in partnership with its suppliers, to position its store fleet for the future. As part of this effort, in the second quarter of 2021, the company decided to convert approximately one-third of its Footaction stores into other existing banner concepts over the course of the year to focus growth on its iconic banners. The company will close the majority of the remaining Footaction stores as leases expire over the next two years and believes this strategic decision will enable it to better serve its consumers in a post-COVID marketplace.

Financial Outlook
Given the ongoing uncertainty created by COVID-19, the company is not providing detailed full-year 2021 guidance at this time.

Photo courtesy Foot Locker