Foot Locker Inc. got a boost for the month and the quarter from additional marquee product this year as continued strength in the Footaction and Champs businesses added icing on the cake of a strengthening U.S. Foot Locker group business. The business also got a boost from increased gift card redemptions in January that were just the ticket to move new product launches from Nike off the shelves. Traditionally a clearance month for many, January this year was used as a launch month for Nike’s new Air Max 360 product. The brand also allocated Air Force 1’s in January, which helped push sales up across the market.

The U.S. Footlocker Group, which includes Foot Locker, Lady Foot Locker, and Kids Foot Locker, saw comps increase in mid-singles for the quarter, with Lady Foot posting the strongest results.

Footaction was reportedly up in double-digits, while the Champs business, which has been positioned as the suburban mall destination, posted a high-single-digit gain. The Direct business, which includes Eastbay and, was said to have had a “very solid” increase for the period, approaching a double-digit gain.

The Foot Locker Europe business kept the total comp gains in check, as issues in Western Europe contributed to a mid-single-digit decline for the region. Business continues to be the most difficult in the U.K. and France, but FL sees positive momentum in new markets to the east. Company Chairman and CEO Matt Serra said that average selling prices in Europe declined in mid- to high-single-digits, due in part to a shift in mix from technical product to fashion low-profile looks.

Total net sales for Foot Locker, Inc. inched up 1.8% to $1.56 billion for the fourth quarter, compared to $1.54 billion in the comparable period last year. Excluding fluctuations in FX rates, total sales improved 3.6% for the quarter and increased 5.5% for the full year. Comp store sales increased 3.9% in the fourth quarter.

Mr. Serra said that the January sales increases in the North America business partially reflected “a more promotional posture during the January clearance period” than initially expected. He said that “merchandise is better positioned for 2006” and within their “inventory aging standard.” That may be one reason gross margins slipped a bit, declining 10 basis points for the period, which the retailer attributed in part to a changing mix of the business.

Unlike Europe, part of that product mix shift is Foot Locker’s move to more low-profile looks that appear to be taking share from the high-margin classics business. The increase in marquee product sales and the shift to more of the fusion product helped push ASP’s in the North America stores up in mid-single-digits for the quarter and the year.

Foot Locker’s Q4 results include pre-tax income of $5 million, or two cents per share, primarily reflecting collections from its insurance companies related to recovery of losses sustained from the gulf hurricanes in the third quarter.

The company saw a benefit of approximately $6 million, or 4 cents per share, to the net income line for fourth quarter, resulting from a reduction of its income tax valuation allowance, and another $3 million, or two cents per share, from insurance proceeds related to the Gulf hurricanes. Foot Locker, Inc. reported that net income for the fourth quarter increased 7.0% to 61 cents per share, or $96 million, from 57 cents per share, or $89 million last year.

Foot Locker, Inc. 
Full Year Results
(in $ millions) 2005 2004 Change
Total Sales $5,653 $5,355 5.60%
Gross Profit % 30.2% 30.5% -30 bps
SG&A% 20.0% 20.3% -30 bps
Net Income $264.0  $293.0  -9.9%
Diluted EPS $1.68 $1.88 -10.6%
Comp Sales +2.7% +0.9%  
Inventories* $1,254  $1,151  +8.9%
* at year-end