Foot Locker, Inc. reported net income of $24 million, or 16 cents per share, for the third quarter ended Nov. 1, 2008, compared with net loss of $33 million, or 22 cents per share, last year. But the retailer lowered its guidance for fiscal 2008 below analyst estimates, reflecting “company's actual results for its third fiscal quarter and a more guarded outlook for its fourth fiscal quarter.”
This latest quarter's results included an impairment charge of $3 million, after tax, or 2 cents per share, pursuant to SFAS No. 115, to write down the value of a short-term investment. Last year's results included an impairment charge to write down long-lived assets for the Company's U.S. store operations pursuant to SFAS No. 144 and expenses associated with closing unproductive stores, totaling $66 million, after tax, or 43 cents per share. For comparison purposes, third quarter net income, before the impairment charges and store closing expenses, was $27 million, or 18 cents per share, in 2008 versus $33 million, or 21 cents per share, in 2007.
Third quarter sales decreased 3.5%, to $1.31 million this year compared with sales of $1.32 million for the corresponding prior year period. Excluding the effect of foreign currency fluctuations, total sales for the thirteen-week period decreased 3.0%. Third quarter comparable-store sales decreased 1.7%.
“Our third quarter financial results reflected the extremely challenging retail environment in the U.S. marketplace,” stated Matthew D. Serra, Foot Locker, Inc.'s chairman and CEO. “The economic slowdown in the United States, particularly during the months of September and October, was offset in part by our ability to improve our sales and earnings in our international businesses. Division profit in our three international businesses, Foot Locker Europe, Foot Locker Canada and Foot Locker Asia Pacific, each increased during the third quarter versus the same period last year.”
For the first nine months of the year, the company reported net income of $45 million, or 29 cents per share, compared with net loss of $34 million, or 22 cents per share, last year.
This year's results included an impairment charge and store closing expenses of $21 million, after-tax, or 14 cents per share. Last year's results included an impairment charge and store closing expenses, of $66 million, after tax, or 43 cents per share. For comparison purposes, year-to-date net income, before the impairment charges and store closing expenses, was $66 million, or 43 cents per share in 2008 versus $32 million, or 21 cents per share last year.
Year-to-date sales decreased 0.9% to $3.92 million compared with sales of $3.96 million last year.
Excluding the effect of foreign currency fluctuations, total sales for the thirty-nine week period decreased 2.8%. Comparable-store sales decreased 1.7%.
At the end of the third quarter, the company's cash and short-term investments totaled $400 million. The company's total cash position, net of debt, at the end of the third quarter was $272 million, an increase of $174 million versus the same time last year. After the close of the third quarter, the company completed the cash purchase of CCS for $103 million. Merchandise inventory at the end of the third quarter was $214 million, or 14.5 percent less than the comparable period of last year.
Store Base Update
The company opened 58 new stores, remodeled or relocated 194 stores, and closed 129 stores during the first nine months of this year. At Nov. 1, 2008, the company operated 3,714 stores in 21 countries in North America, Europe and Australia. In addition, 16 franchised stores are currently operating in the Middle East and South Korea.
Updated Earnings Guidance
The company expects its net income for fiscal 2008, excluding impairment charges, to be in a range of 50 cents to 63 cents per share. This estimate is a decrease from its previous guidance of 70 cents to 85 cents reflecting the company's actual results for its third fiscal quarter and a more guarded outlook for its fourth fiscal quarter.
FOOT LOCKER, INC.
Condensed Consolidated Statements of Operations
Periods ended November 1, 2008 and November 3, 2007
(In millions, except per share amounts)
Third Quarter Third Quarter
Sales $1,309 $1,356
Cost of sales 954 975
Selling, general and administrative expenses 287 289
Depreciation and amortization 32 45
Impairment charge & store closing program costs 3 105
Interest expense, net 1 ---
Other expense (income) (5) ---
Income (loss) from continuing operations
before income taxes 37 (58)
Income tax expense (benefit) 13 (24)
Income (loss) from continuing operations 24 (34)
Discontinued operations, net of tax --- 1
Net income (loss) $24 $(33)
Income (loss) from continuing operations $0.16 $(0.22)
Discontinued operations, net of tax --- ---
Net income (loss) $0.16 $(0.22)
Weighted-average diluted shares outstanding 155.6 153.6