Foot Locker, Inc. reported net income from continuing operations of $0.47 per share for its fourth quarter and $1.40 per share for its full year ended January 31, 2004. The Company also reported a substantially enhanced financial position, with a year-end cash balance of $448 million, up 25 percent from the 2002 year-end cash balance of $357 million.
Income from continuing operations for the fourth quarter ended January 31, 2004 increased 48 percent to $71 million, or $0.47 per share, compared with $48 million, or $0.33 per share, last year. Sales for this year's fourth quarter increased 9.9 percent, to $1,334 million, as compared with $1,214 million last year, reflecting a comparable-store increase of 3.9 percent.
Income from continuing operations for the full year increased 29 percent to $209 million, or $1.40 per share, as compared with $162 million, or $1.10 per share, last year. Sales for the full year increased 6.0 percent, to $4,779 million as compared with sales of $4,509 million last year, reflecting a comparable-store decrease of 0.5 percent.
“Over the past five years, we significantly increased our earnings and strengthened our financial position,” stated Matthew D. Serra, Foot Locker Inc.'s Chairman and Chief Executive Officer. “We are particularly pleased with our fourth quarter results which exceeded our expectations. During this recent quarter, our comparable store sales strengthened versus earlier in the year and we benefited from a higher gross margin rate and more efficient expense structure.”
The Company continued to utilize its cash flow to reduce its debt, increase its cash balance and enhance its financial position. At year-end, the Company's cash balance grew to $448 million. Net of debt, the Company's cash position increased $112 million versus last year.
During 2003, the Company continued to focus on maximizing its store base's productivity, in the process opening 113 new stores, remodeling/relocating 250 stores, and closing 128 stores. At January 31, 2004, the Company operated 3,610 stores in 16 countries in North America, Europe and Australia.
“Continuing to strengthen our financial position remains a high priority for our Company, as we strive to attain an investment grade credit rating,” continued Mr. Serra. “During the past five years we increased our cash, net of debt position by $686 million. As a result, our net interest expense declined significantly by $33 million, to $18 million in 2003 as compared with $51 million in 1999. This strengthened financial position allowed us to initiate a shareholder dividend program in 2002, and enabled the Company to double the amount of its quarterly dividend payout beginning in the fourth quarter of 2003.”
On February 26, 2004, Moody's Investor Services upgraded the Company's Senior Implied Credit Rating to Ba1. The upgrade was “based on the company's considerable progress in improving profit margins, free cash flow and credit metrics despite shifts in consumer preferences and a challenging retail environment.”
The Company expects to generate a mid-to-high single digit total sales increase during 2004, and continue to improve, as compared with the prior year, its gross margin rate and SG&A expenses, as a percentage of sales. As a result, earnings per share growth of 10-to-20 percent is currently expected for the full year. A similar EPS growth rate of 10-to-20 percent is currently anticipated for the Company's first fiscal quarter. The Company's capital expenditure program is planned at $165 million for 2004, and includes the opening of 110 new stores, the roll-out of a new point-of-sale system in the Foot Locker stores in the U.S. and an expansion of the Company's European distribution center.
“We remain confident that our business will continue to grow and produce meaningful annual earnings increases over the next several years,” commented Mr. Serra. “The economic environment in the United States is improving and the retail climate, including mall traffic and promotional climate, has stabilized. Our merchandise inventory is well positioned for 2004, and additional expense leveraging is expected to result from infrastructure enhancements and our cost reduction efforts.”
In January 2004, Footlocker.com entered into a six-year agreement with the United States Olympic Committee providing the Company with the exclusive rights to sell USOC licensed products through catalogs and via a new E-commerce site.
FOOT LOCKER, INC.
Consolidated Statements of Operations
(unaudited)
Periods ended January 31, 2004 and February 1, 2003
(In millions, except per share amounts)
Fourth Quarter Fourth Quarter
2003 2002
Sales $1,334 $1,214
Cost of sales 922 845
Selling, general and administrative expenses 263 253
Depreciation and amortization 35 38
Interest expense, net 4 7
1,224 1,143
Income from continuing operations before
income taxes 110 71
Income tax expense 39 23
Income from continuing operations 71 48
Income on disposal of discontinued
operations, net of tax -- 9
Net income $71 $57
Diluted EPS:
Income from continuing operations $0.47 $0.33
Income on disposal of discontinued operations -- 0.06
Net income $0.47 $0.39
Full Year Full Year
2003 2002
Sales $4,779 $4,509
Cost of sales 3,302 3,165
Selling, general and administrative expenses 987 928
Depreciation and amortization 147 149
Restructuring charge (income) (1) 1 (2)
Interest expense, net 18 26
Other income (2) -- (3)
4,455 4,263
Income from continuing operations before
income taxes 324 246
Income tax expense 115 84
Income from continuing operations 209 162
Loss on disposal of discontinued
operations, net of tax (1) (9)
Cumulative effect of accounting change,
net of tax (3) (1) --
Net income $207 $153
Diluted EPS:
Income from continuing operations $1.40 $1.10
Loss on disposal of discontinued operations (0.01) (0.05)
Net income $1.39 $1.05
