Foot Locker, Inc. net income for the first quarter ended May 5, 2007 was $17 million, or 11 cents per share, as compared with $59 million, or 38 cents per share, last year. Last year's results benefited by $1 million, or one penny per share, from a cumulative effect of accounting change related to the Company's required adoption of SFAS 123.
First quarter sales decreased 3.6% to $1.316 billion, as compared with sales of $1.365 billion last year. Excluding the effect of foreign currency fluctuations, total sales for the 13- week period decreased 5.3%. First quarter comparable-store sales decreased 5.1%.
“Our first quarter financial results reflected a weak performance in each of our U.S. businesses partially offset by a solid profit increase at our international operations,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “Because of the disappointing sales at our U.S. stores, we increased our promotional posture to help clear older goods and reduce inventory levels. As a result, our gross margin in our U.S. store businesses fell significantly short of our plan.”
Mr. Serra continued, “While we are seeing signs of improvement in our U.S. store businesses, we believe it is prudent to more-conservatively plan our business for the balance of 2007. Therefore, for our second fiscal quarter, we currently expect earnings to be in the range of 15 cents to 20 cents per share. This forecast includes higher markdowns than last year to ensure that our inventory is well-positioned for the fall season. We currently expect that our earnings for the full year will be in the range of $1.15 to $1.25 per share.”
During the first quarter, the Company opened 61 new stores; remodeled/relocated 65 stores and closed 73 stores. At May 5, 2007, the Company operated 3,930 stores in 20 countries in North America, Europe and Australia. The store openings include 31 new Footquarters stores, the Company's new value-based footwear chain. In addition, three additional Foot Locker franchised stores were operating in the Middle East.
The Company continued to strengthen its financial position while also redeploying its strong cash flow with a goal of enhancing shareholder value. At the end of the first quarter, the Company's cash position, net of debt, was $183 million, an $85 million improvement from the same time last year. The Company's cash and short-term investments totaled $418 million, while its total debt was $235 million. During the first quarter, the Company paid out $19 million in shareholder dividends and repurchased 1.2 million shares of its common stock for $26 million.
FOOT LOCKER, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Periods ended May 5, 2007 and April 29, 2006
(In millions, except per share amounts)
First First
Quarter Quarter
2007 2006
Sales $ 1,316 $ 1,365
Cost of sales 956 946
Selling, general and administrative expenses 290 283
Depreciation and amortization 43 43
Interest expense, net --- 1
1,289 1,273
Income before income taxes and
cumulative effect of accounting change 27 92
Income tax expense 10 34
Income before cumulative effect of
accounting change 17 58
Cumulative effect of accounting
change, net of income tax --- 1
Net income $ 17 $ 59
Diluted EPS:
Income before cumulative effect of
accounting change $ 0.11 $ 0.37
Cumulative effect of accounting change --- 0.01
Net income $ 0.11 $ 0.38
Weighted-average diluted shares outstanding 156.5 156.7
