Foot Locker, Inc. reported a net loss of $18 million, or 12 cents per share, for the second quarter ended August 4, 2007 compared to net income of $14 million, or 9 cents per share, last year. Second quarter sales decreased 1.5%, to $1,283 million this year compared with sales of $1,303 million for the corresponding prior year period. Second quarter comparable-store sales decreased 7.3%.

“Our second quarter results reflected lower than expected sales and the impact of a strategic decision to significantly accelerate the clearance of slow-selling merchandise inventory in our U.S. stores,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “This inventory clearance strategy resulted in markdowns increasing in our U.S. stores by $50 million, at cost, or $0.20 per share, versus the second quarter of last year. As a result, we are now better positioned to offer more exciting and compelling products for the fall season. At the same time, the division profit of our international stores increased approximately 20 percent from the same period last year, (excluding the $17 million pre-tax charge recorded in 2006 to write down long-lived assets pursuant to SFAS 144).”

Year-to-Date Results

For the first six months of the year, the company reported a net loss of $1 million, or a penny per share, compared with net income of $73 million, or 47 cents per share, last year. Year-to-date sales decreased 2.6% to $2,599 million compared with sales of $2,668 million last year. Comparable- store sales decreased 6.2%.

Financial Position

At the end of the second quarter, the company's cash and short-term investments totaled $363 million. The company's cash position, net of debt, increased by $86 million from the same time last year. During the second quarter, the company repurchased 1.1 million shares of its common stock for $24 million. For the first six months of the year, the company repurchased 2.3 million shares for $50 million.

The company's merchandise inventory at the end of the second quarter was 1.6% lower than at the end of the second quarter last year. Stated in constant currency dollars, the company's merchandise inventory decreased 3.2 percent versus last year. Merchandise inventory in the company's U.S. stores was approximately 4% lower than last year, with goods older than 12 months reduced from last year by approximately 40%. At the company's international stores, merchandise inventory was essentially flat with last year.

Store Base Update

During the first six months of the year, the company opened 78 new stores, remodeled/relocated 129 stores and closed 115 stores. At August 4, 2007, the company operated 3,905 stores in 20 countries in North America, Europe and Australia. In addition, seven franchised stores were operating in the Middle East. During the first week of the third quarter, the company converted its Footquarters stores to Foot Locker and Champs Sports outlet stores.

During the next six months of 2007, the company currently expects to open approximately 40 stores and, as previously announced, close 135 to 150 unproductive stores. Approximately 90 of the estimated store closings are expected to occur at or near their normal lease expiration and have minimal or no expense impact to the company. Depending on the outcome of landlord negotiations, 50 to 60 of the stores are expected to close prior to normal lease expiration. The cash costs associated with closing these 135 to 150 stores are expected to be essentially offset by the cash benefits of the working capital reduction.

Mr. Serra continued, “Given the uncertainty of several factors that may affect our financial results, we are not providing a financial forecast for the balance of the year at this time. These uncertainties include the current challenging athletic retail environment in the U.S. and incremental costs associated with the closing of the additional stores. In addition, we will continue to assess the impact of the recent merchandise initiatives on the financial results of our domestic businesses during the fall 2007 season. This assessment may include an analysis of the recoverability of store long- lived assets pursuant to SFAS 144 that may result in a non-cash impairment charge.”

                          FOOT LOCKER, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Periods ended August 4, 2007 and July 29, 2006
(In millions, except per share amounts)

Second Second
Quarter Quarter
2007 2006

Sales $ 1,283 $ 1,303

Cost of sales 981 942
Selling, general and
administrative expenses 286 273
Depreciation and amortization 44 44
Impairment charge -- 17
Interest expense, net -- 1
Other expense 1 1
1,312 1,278
Income (loss) before income taxes (29) 25
Income tax expense (benefit) (11) 11
Net income (loss) $ (18) $ 14

Diluted EPS:
Net income (loss) $ (0.12) $ 0.09

Weighted-average diluted
shares outstanding 154.0 156.7