FOOT LOCKER, INC. NEW YORK, Nov. 20, 2015 /PRNewswire/ -- Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, today reported financial results for its third quarter ended October 31, 2015.
Third Quarter Results
Net income for the Company's third quarter ended October 31, 2015 was $80 million, or $0.57 per share. This result included a $100 million pre-tax litigation charge that relates to the previously disclosed trial court decision in a lawsuit involving the Company's conversion of its pension plan in 1996, a decision which is currently being appealed. Excluding this charge, which reduced after-tax earnings by 43 cents per share, non-GAAP earnings were $1.00 per share, a 20 percent increase over the 83 cents per share the Company earned in the same period last year on a comparable basis.
Third quarter comparable-store sales increased 8.7 percent. Total sales increased 3.6 percent, to $1,794 million this year, compared with sales of $1,731 million for the corresponding prior-year period. Excluding the effect of foreign currency fluctuations, total sales for the third quarter increased 8.9 percent. The Company's gross margin rate improved to 33.8 percent of sales from 33.2 percent a year ago, while the selling, general, and administrative expense rate improved to 19.6 percent of sales from 20.4 percent.
"This quarter, in fact this entire year, has offered a perfect illustration of how building diversity into our business has helped us sustain record-setting growth over multiple quarters and years," said Richard Johnson, President and Chief Executive Officer. "We have built strength across different banners and channels; we have a global footprint; we have excellent momentum in men's, women's, and kids'; and we have multiple legs to our product category stool, with leadership positions in basketball, running, and classic sneakers."
Year-To-Date Results
Net income for the Company's first nine months of the year increased to $383 million, or $2.71 per share, compared to net income of $374 million, or $2.55 per share, for the corresponding period in 2014. Excluding the litigation charge noted above, earnings per share for the first nine months totaled $3.14, a 22 percent increase over the same period last year.
Year-to-date sales were $5,405 million, an increase of 3.1 percent compared to sales of $5,240 million in the corresponding nine-month period of 2014. Year-to-date comparable store sales have increased 8.7 percent.
Excluding the effect of foreign currency fluctuations, total sales year-to-date have increased 8.9 percent.
Financial Position
At October 31, 2015, the Company's merchandise inventories were $1,336 million, 0.9 percent higher than at the end of the third quarter last year. Using constant currencies, inventory increased 4.5 percent.
The Company's cash totaled $878 million, while the debt on its balance sheet was $131 million. The Company spent $110.6 million to repurchase 1.56 million shares during the quarter and paid its quarterly stock dividend of $0.25, spending $35 million.
"We continue to manage inventory carefully, and we are heading into the holidays with very fresh and distinctive assortments to drive full-price selling," said Lauren Peters, Executive Vice President and Chief Financial Officer. "Foot Locker also has a very strong balance sheet and a well-funded pension plan. Our pension plan is sufficiently funded today to absorb a $100 million liability resulting from this litigation without requiring any cash contributions by the Company to the plan in the near term. This charge does not change our ability to invest in the business to reach the 2020 goals we laid out at the beginning of the year, and to return cash to shareholders in the same manner as we intended to before this accrual."
Store Base Update
During the third quarter, the Company opened 30 new stores, remodeled or relocated 48 stores, and closed 16 stores. As of October 31, 2015, the Company operated 3,432 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, 48 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 16 franchised Runners Point stores in Germany.
The Company is hosting a live conference call at 9:00 a.m. (EST) today, November 20, 2015, to review these results, provide comments on the status of its current initiatives, and discuss trends in its business and the athletic industry. This conference call may be accessed live by dialing 1-800-954-0597 (U.S. and Canada) or +44 203-300-0096 (International), or via the Investor Relations section of the Foot Locker, Inc. website at http://www.footlocker-inc.com. Please log on to the website 15 minutes prior to the call in order to download any necessary software. A replay of the call will be available via webcast from the same Investor Relations section of the Foot Locker, Inc. website at http://www.footlocker-inc.com through December 4, 2015.
Disclosure Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the federal securities laws. Other than statements of historical facts, all statements which address activities, events, or developments that the Company anticipates will or may occur in the future, including, but not limited to, such things as future capital expenditures, expansion, strategic plans, financial objectives, dividend payments, stock repurchases, growth of the Company's business and operations, including future cash flows, revenues, and earnings, and other such matters, are forward-looking statements. These forward-looking statements are based on many assumptions and factors which are detailed in the Company's filings with the Securities and Exchange Commission, including the effects of currency fluctuations, customer demand, fashion trends, competitive market forces, uncertainties related to the effect of competitive products and pricing, customer acceptance of the Company's merchandise mix and retail locations, the Company's reliance on a few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor), pandemics and similar major health concerns, unseasonable weather, deterioration of global financial markets, economic conditions worldwide, deterioration of business and economic conditions, any changes in business, political and economic conditions due to the threat of future terrorist activities in the United States or in other parts of the world and related U.S. military action overseas, the ability of the Company to execute its business and strategic plans effectively with regard to each of its business units, and risks associated with global product sourcing, including political instability, changes in import regulations, and disruptions to transportation services and distribution.
For additional discussion on risks and uncertainties that may affect forward-looking statements, see "Risk Factors" disclosed in the 2014 Annual Report on Form 10-K. Any changes in such assumptions or factors could produce significantly different results. The Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise.
FOOT LOCKER, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Periods ended October 31, 2015 and November 1, 2014
(In millions, except per share amounts)
Third Third
Quarter Quarter
2014
2015 YTD 2015 YTD 2014
---- -------- --------
Sales $1,794 $1,731 $5,405 $5,240
Cost of sales 1,187 1,157 3,575 3,495
SG&A 352 353 1,028 1,051
Depreciation and amortization 38 34 109 106
Litigation and impairment charges 100 - 100 3
Interest expense, net 1 1 3 3
Other Income (1) (1) (2) (3)
--- --- --- ---
1,677 1,544 4,813 4,655
----- ----- ----- -----
Income before taxes $117 $187 $592 $585
Income tax expense 37 67 209 211
--- --- --- ---
Net income $80 $120 $383 $374
=== ==== ==== ====
Diluted EPS $0.57 $0.82 $2.71 $2.55
Weighted-average diluted shares
outstanding
140.9 145.7 141.4 146.6
Reconciliation of GAAP to
Non-GAAP results
Third Third
Quarter Quarter YTD YTD
2015 2014
2015 2014
---- ----
After After After After
----- ----- ----- -----
Tax EPS Tax EPS Tax EPS Tax EPS
--- --- --- --- --- --- --- ---
GAAP net income $80 $0.57 $120 $0.82 $383 $2.71 $374 $2.55
After-tax adjustments:
Litigation expense (1) 61 0.43 - - 61 0.43 - -
Impairment and other charges (2) (3) - - 1 0.01 - - 4 0.03
--- --- --- ---- --- --- --- ----
Non-GAAP results $141 $1.00 $121 $0.83 $444 $3.14 $378 $2.58
==== ===== ==== ===== ==== ===== ==== =====
Footnotes to
explain
adjustments
-------------
(1) The Company's
reasonable
estimate of
the
litigation
expense is a
range
between $100
million and
$200
million,
with no
amount
within that
range more
probable
than any
other
amount.
Therefore,
in
accordance
with U.S.
GAAP, the
Company
recorded a
$100 million
pre-tax
charge in
the third
quarter. In
light of the
uncertainties
in this
matter,
there is no
assurance
that the
ultimate
resolution
will not
differ from
the amount
currently
accrued by
the Company.
(2) Includes $1
million and
$2 million
of
integration
costs
associated
with the
Runners
Point Group
for Q3 2014
and YTD
2014,
respectively.
(3) For YTD 2014,
also
includes the
impairment
of a trade
name in
Ireland
acquired in
2004 and the
CCS trade
name.
FOOT LOCKER, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(In millions)
October 31, November 1,
2015 2014
---- ----
Assets
CURRENT ASSETS
Cash and cash
equivalents $878 $916
Merchandise
inventories 1,336 1,324
Other current
assets 277 244
2,491 2,484
Property and
equipment, net 669 613
Deferred tax
assets 256 237
Other assets 285 284
--- ---
$3,701 $3,618
====== ======
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable $258 $287
Accrued and other
liabilities 407 358
Current portion of
capital lease
obligations 1 3
--- ---
666 648
Long-term debt
and obligations
under capital
leases 130 132
Other liabilities 358 236
SHAREHOLDERS'
EQUITY 2,547 2,602
----- -----
$3,701 $3,618
====== ======
FOOT LOCKER, INC.
Store and Square Footage
(unaudited)
Store activity is as follows:
January 31, October 31, Relocations/
Remodels
2015 Opened Closed 2015
---- ------ ------ ----
Foot Locker US 1,015 7 25 997 46
Foot Locker Europe 603 10 6 607 25
Foot Locker Canada 126 1 2 125 6
Foot Locker Asia
Pacific 91 3 1 93 5
Lady Foot Locker/
SIX:02 213 11 22 202 -
Kids Foot Locker 357 23 7 373 36
Footaction 272 9 9 272 14
Champs Sports 547 8 5 550 35
Runners Point 116 9 1 124 1
Sidestep 83 7 1 89 -
Total 3,423 88 79 3,432 168
Selling and gross square footage are as follows:
January 31, 2015 October 31, 2015
---------------- ----------------
(in thousands) Selling Gross Selling Gross
------- ----- ------- -----
Foot Locker US 2,494 4,298 2,496 4,309
Foot Locker Europe 846 1,839 858 1,882
Foot Locker Canada 270 422 277 432
Foot Locker Asia Pacific 125 204 126 206
Lady Foot Locker/SIX:02 299 501 288 485
Kids Foot Locker 529 912 593 1,014
Footaction 789 1,258 800 1,300
Champs Sports 1,913 2,927 1,939 2,964
Runners Point 143 244 159 260
Sidestep 75 129 83 140
Total 7,483 12,734 7,619 12,992
Contact: John A. Maurer
Vice President,
Treasurer and Investor
Relations
Foot Locker, Inc.
(212) 720-4092
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/foot-locker-inc-reports-2015-third-quarter-results-300182394.html
SOURCE Foot Locker, Inc.
