Footstar, Inc. reported that comparable store sales for the thirteen-week period ended June 28, 2003 declined 2.2%. Comparable store sales at Meldisco decreased 4.9%, and comparable store sales for the athletic segment increased 1.0%.
Total sales for the second quarter were $491.3 million, a decrease of 17.2% from $593.1 million in the second quarter of 2002. Total sales for the Meldisco division declined 28.6% to $262.4 million from $367.6 million, and total sales in the Company’s athletic segment increased 1.5% to $228.9 million from $225.5 million. The overall sales decline in large part reflects fewer Kmart and J. Baker stores in operation at Meldisco.
For the twenty-six-week period ended June 28, 2003, the Company’s comparable store sales declined 3.7%. Comparable store sales at Meldisco were down by 7.7%, and comparable store sales for the athletic segment rose 0.5%.
The Company’s total sales for the twenty-six week period were $973.9 million, a decrease of 15.1% from $1,146.9 million in the same period of 2002, reflecting, again, in large part the fewer stores in operation at Meldisco. Total sales for Meldisco declined 26.3% to $503.2 million from $683.2 million, and total sales in the Company’s athletic segment increased 1.5% to $470.7 million from $463.7 million.
Footstar’s second quarter performance reflects a number of factors across the Company’s business. At Meldisco, sales this spring were below plan, especially in sandals and beachwear, due to the cold, wet weather that prevailed until the final days of June. The Company’s Thom McAn business, however, remained strong across genders and retailers. In the athletic segment, results were mixed. Footaction delivered high single digit comparable store sales gains as the chain benefited from increased offerings from Nike, which has resulted in higher quantities of exclusive and allocated product in Footaction stores. Just For Feet continued to experience reduced customer traffic, which led to a nearly double digit comparable store sales decline. Based on the success of increased Nike products at Footaction, the Company will expand the scope of Nike offerings at Just For Feet and in its Consumer Direct business beginning in the fourth quarter of 2003.
In the second half of the year, the Company’s focus is to continue to manage through the difficult changes in its business, including a nearly 30% smaller Kmart store base and the more competitive nature of its core family footwear and athletic footwear markets. Meldisco will continue to experience the impact on both sales and margins of the approximately 600 combined Kmart store closings in 2002 and 2003. As the Company noted in its January 15, 2003 press release, the 316 Kmart stores closed in 2003 as part of the bankruptcy proceedings had more profitable footwear departments than the 283 stores closed in 2002. In addition, the 2003 store closings took place earlier in the year. While the Company’s distribution in Wal-Mart is contributing positively to results, the loss of these 600 Kmart footwear departments is having a significant negative effect.
Footstar continues to explore new opportunities to broaden its reach and distribution, including moving forward with the development of its Shoe Zone store concept, which has achieved initial success in Puerto Rico, while seeking to optimize performance in the new, post-bankruptcy Kmart. The athletic segment will continue to work with key vendors to enhance results, while management plans to take further steps to address Just For Feet’s underperformance, including working to bring more allocated and exclusive product into stores, altering the chain’s media message and frequency, and continuing to refine the merchandise mix.
In addition to the lower-than-expected sales in the first half due to the unseasonable weather pattern and the Kmart store closings, results for the full 2003 year are also expected to reflect lower margins at Meldisco, due to its investment in infrastructure and dedicated teams to support its newer businesses at Wal-Mart, Shoe Zone and in occupational footwear. Full year results will also include a number of one-time costs associated with the Kmart store closings, as well as expenses related to the Company’s previously announced accounting investigation and restatement. “We appreciate the continued support of our lenders and vendors during this period,” Mickey Robinson, Chairman and Chief Executive Officer, commented.
Footstar, Inc. ---------------- Comparable Store Sales ------------------------ Change from Prior Year ------------------------ Thirteen Weeks Twenty Six Weeks -------------------- -------------------- Ended Ended ----- ----- June 28, 2003 June 28, 2003 -------------------- -------------------- Athletic segment 1.0% 0.5% Meldisco (4.9%) (7.7%) Footstar, Inc. (2.2%) (3.7%)