Foot Locker Inc. reported net income rose 17.7% to $113 million, or 72 cents a share, from $96 million, or 61 cents, a year ago. , Sales increased 5.6% to $1.65 billion from $1.56 billion, reflecting an additional week in the current period. Comparable-store sales decreased 3.4%.

Included in this year's results is income of $3 million, or two cents a share, from discontinued operations. Income from continuing operations was $110 million, or 70 cents a share, compared with $96 million, or 61 cents, a year ago, an increase of 14.6%.

The fourth quarter results benefited from the additional week, which contributed $18 million, or 11 cents a share, to this year's results, while a reduction of the company's income tax valuation allowance provided a benefit of $6 million, or 4 cents, to last year's results. For comparative purposes, Foot Locker said income from continuing operations to $95 million, or 59 cents a share, against $90 million, or 57 cents a share, the prior year excluding these items.

“Our fourth quarter income from continuing operations came in higher than the guidance that we provided at the beginning of the quarter, primarily due to the stronger than expected earnings we generated during the extra week of the fiscal year,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “While the athletic footwear and apparel retail environment in the U.S. was challenging, our domestic divisions generated a solid profit increase in the fourth quarter. In Europe, we continued to experience sales declines as we adjusted our merchandise assortments to be better aligned with the current fashion trend. A stronger gross margin rate, however, contributed to a stabilization of our fourth quarter profit at this division which, as a%age of sales, was in the solid double digit level.”

Net income for the full year was $251 million, or $1.60 per share, including a non-cash impairment charge of $12 million, or 8 cents a share, recorded in the second quarter of 2006 to write down long-lived assets at the company's European operation, pursuant to SFAS No. 144, and income from discontinued operations of $3 million, or 2 cents a share, a year ago. In fiscal year 2005, the company reported net income per share of $264 million, or $1.68 per share, and included $1 million, or one cent a share, from discontinued operations. Income from continuing operations for the full year was $247 million, or $1.58, versus $263 million, or $1.67 per share, last year.

Full year sales increased 1.7%, to $5.75 billion, as compared with sales of $5.65 billion last year, reflecting the benefit of the additional week this year, and negatively impacted by a comparable-store sales decrease of 1.2%.

At the end of the year, the company's cash position was $470 million. During the year the company redeployed its strong cash flow to fund the following initiatives: cash capital expenditures of $165 million; long-term debt repayments of $88 million; pension fund contributions of $68 million, shareholder dividends of $61 million, and share repurchases of $8 million.

Included in the company's 2006 capital expenditure program was the opening of 146 new stores, remodeling or relocating 278 stores and closing 125 stores. At February 3, the company operated 3,942 stores in 20 countries in North America, Europe and Australia. In addition, three Foot Locker franchised stores were operating in the Middle East.

The company also today announced that its Board of Directors authorized a new $300 million, 3-year share repurchase program. A total of approximately 334,000 shares were purchased in 2006 for $8 million under the Company's previous $150 million authorization.

“The strength of our current financial position and expected future cash flow allow us the opportunity to consider significantly increasing the amount of cash that we return to our shareholders,” stated Serra. “We believe that we can increase our share repurchase program while, at the same time, continuing to execute our growth strategies and pay a meaningful shareholder dividend.”

Looking to 2007, the company's strategic plan includes the planned implementation in 2007 of several key initiatives that are expected to add meaningfully to shareholder value. The planned strategic initiatives for 2007 include:

  • Open 100 new stores, close 100-to-150 poor performing stores;
  • Remodel or relocate 200-to-300 stores in its existing athletic footwear and apparel formats;
  • Open 70 new family footwear stores under the Footquarters name and develop plans to open up to an additional 200 stores in 2008;
  • Expand franchising operation in the Middle East with 15 additional stores and research new countries where the Company expects it could operate profitably;
  • Continue the pursuit of acquiring compatible specialty retail companies in the footwear industry;
  • Utilize the company's expected strong cash flow to increase dividends;
  • Retire debt, and/or repurchase shares of the Company's stock.

Capital expenditures for 2007 are planned at $170 million to support its existing business and the development of Footquarters. The company currently expects its fiscal year 2007 earnings from continuing operations, and without the benefit of the 53rd week that added $0.11 per share to 2006 earnings, to be in the range of $1.55 to $1.65 per share. The Company currently expects its first quarter earnings to be in the range of $0.34 to $0.37 per share.

The company plans to discontinue the practice of reporting quarterly sales information in a separate release prior to the reporting of its quarterly earnings. The company believes that the simultaneous release of quarterly earnings and sales information in one press release is a practice that is becoming more common among industry peers, and is also consistent with best practices. Thus, beginning with the first quarter of 2007, the Company will issue one press release on May 24, 2007 that will report both sales and earnings for that period.

                              FOOT LOCKER, INC.
               Condensed Consolidated Statements of Operations
             Periods ended February 3, 2007 and January 28, 2006
                   (In millions, except per share amounts)

                                            Fourth Quarter      Fourth Quarter
                                                 2006                2005

    Sales                                 14 Weeks   13 Weeks      13 Weeks
                                           $1,652     $1,557        $1,564

    Cost of sales                           1,118      1,063         1,080
    Selling, general and administrative
     expenses                                 323        312           301
    Depreciation and amortization              44         44            43
    Interest expense, net                      --         --             2
    Other expense (income)                     (7)        (7)           (3)
                                            1,478      1,412         1,423

    Income from continuing operations
     before income taxes                      174        145           141
    Income tax expense                         64         53            45
    Income from continuing operations         110         92            96
    Income from disposal of discontinued
     operations, net of tax                     3          3            --
    Net income                               $113        $95           $96

    Diluted EPS:
    Income from continuing operations       $0.70      $0.59        $ 0.61
    Income from disposal of discontinued
     operations, net of tax                  0.02       0.02            --
    Net income                              $0.72      $0.61        $ 0.61

    Weighted-average diluted shares
     outstanding                            156.9      156.9         156.7

                                              Year-To-Date       Year-To-Date
                                                  2006               2005
                                           53 Weeks  52 Weeks      52 Weeks
    Sales                                  $5,750     $5,655        $5,653
    Cost of sales                           4,014      3,959         3,944
    Selling, general and administrative
     expenses                               1,163      1,152         1,129
    Depreciation and amortization             175        175           171
    Impairment charge                          17         17            --
    Interest expense, net                       3          3            10
    Other expense (income)                    (14)       (14)           (6)
                                            5,358      5,292         5,248
    Income from continuing operations
     before income taxes and cumulative
     effect of accounting change              392        363           405
    Income tax expense                        145        134           142
    Income from continuing operations         247        229           263
    Income from disposal of discontinued
     operations, net of tax                     3          3             1
    Cumulative effect of accounting change,
     net of tax                                 1          1            --
    Net income                               $251       $233          $264

    Diluted EPS:
    Income from continuing operations       $1.58      $1.47         $1.67
    Income from disposal of discontinued
     operations, net of tax                  0.02       0.02          0.01
    Cumulative effect of accounting change,
     net of tax                                --         --            --
    Net income                              $1.60      $1.49         $1.68