Foot Locker Cuts Q2 Guidance and Explores Strategic Alternatives

Foot Locker initiated several steps during Q2 that are designed to strengthen its business operations. Among those actions are merchandise inventory reduced through aggressive clearance strategy; additional U.S. stores identified for potential early closure; more aggressive store opening plans being developed for Foot Locker Europe; and senior division management changes. The Company also confirmed that it had retained Lehman Brothers as an
advisor to work with the Company to evaluate strategic alternatives,
including inquiries received from private equity firms.

Foot Locker, Inc. updated its financial forecast for its second quarter 2007 primarily to reflect the impact of the merchandise inventory clearance activity. As a result of that and other actions, the Company currently expects to report a loss in a range of $0.17-to-$0.20 per share. Previously, the company expected earnings of 15 cents to 20 cents per share. This range reflects increased markdowns in the Company's U.S. stores of approximately $55 million at cost, or approximately $0.22 per share, versus the same period last year to liquidate slow-selling merchandise. The Company's estimate for the second quarter that was provided at the beginning of the period was net income of $0.15-to-$0.20 per share. The Company also updated its financial forecast for the second quarter to reflect that its comparable-store sales are expected to decrease 7-to-8 percent.

“During the second quarter, we made the strategic decision to liquidate slower-selling merchandise in our U.S. stores more aggressively than we had planned at the beginning of the quarter, with an objective of improving our inventory position before the start of the fall season,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “The financial impact of implementing this important strategy was the primary reason for the projected net loss for the second quarter of 2007. We expect our international units will produce a double-digit division profit increase versus last year's comparable period.”

The Company's financial position continued to strengthen during the second quarter, as its cash position, net of debt, is expected to increase by approximately $50 million from the same time last year. Merchandise inventory at the end of the second quarter is expected to be lower than at the same period last year. During the first six months of the year, the Company repurchased 2.3 million shares of its common stock for $50 million under a three-year $300 million share repurchase program. Additional shares may be purchased this year based on market conditions and other factors.

Through an extensive review of its store base, the Company identified a number of unproductive domestic stores that it is pursuing to close over the next several months. Depending on the success in negotiating settlements with its landlords, a total of up to 250 stores will be closed in 2007. This is approximately twice the number of stores that the Company had originally planned to close in 2007 and, as a result of this action, it is expected that the profitability of the Company's U.S. store base will be enhanced, beginning in 2008.

At the same time, the Company is in the process of developing plans to open additional Foot Locker stores more aggressively in the European and surrounding markets. During 2008, the Company currently expects to open up to 30 new stores in this region that will be managed by the Foot Locker Europe management team.

Three key management changes were also announced, effective August 6, 2007. Keith Daly, currently President and CEO of Foot Locker Europe since 2005, was promoted to President and CEO of Foot Locker U.S. with responsibility for the Company's Foot Locker, Footaction and Kids Foot Locker stores in the U.S. Mr. Daly will be replaced by Dick Johnson, who has been President and CEO of Footlocker.com since 2003. An executive search is currently being conducted to identify a suitable candidate to replace Mr. Johnson. Dowe Tillema was promoted to Executive Vice President of Footlocker.com and will continue in his role as Chief Financial Officer of this division.