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PART I

Item 1.  Business

General

Foot Locker, Inc., incorporated under the laws of the State of New York in 1989, is a leading global retailer of athletically inspired shoes and apparel, operating 3,3353,383 primarily mall-based stores in the United States, Canada, Europe, Australia, and New Zealand as of February 2, 2013.January 30, 2016. Foot Locker, Inc. and its subsidiaries hereafter are referred to as the “Registrant,” “Company,” “we,” “our,” or “us.” Information regarding the business is contained under the “Business Overview” section in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The Company maintains a website on the Internet atwww.footlocker-inc.com. The Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge through this website as soon as reasonably practicable after they are filed with or furnished to the SEC by clicking on the “SEC Filings” link. The Corporate Governance section of the Company’s corporate website contains the Company’s Corporate Governance Guidelines, Committee Charters, and the Company’s Code of Business Conduct for directors, officers and employees, including the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer. Copies of these documents may also be obtained free of charge upon written request to the Company’s Corporate Secretary at 112 West 34^th Street, New York, N.Y. 10120. Effective May 1, 2016 the address to use will be 330 West 34^th Street, New York, N.Y. 10001. The Company intends to promptly disclose amendments to the Code of Business Conduct and waivers of the Code for directors and executive officers on the Corporate Governance section of the Company’s corporate website.

Information Regarding Business Segments and Geographic Areas

The financial information concerning business segments, divisions, and geographic areas is contained under the “Business Overview” and “Segment Information” sections in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Information regarding sales, operating results, and identifiable assets of the Company by business segment and by geographic area is contained under theSegment Information note in “Item 8. Consolidated Financial Statements and Supplementary Data.”

The service marks, trade names, and trademarks appearing in this report (except for Nike, Inc. and Alshaya Trading Co. W.L.L.) are owned by Foot Locker, Inc. or its subsidiaries.

Employees

The Company and its consolidated subsidiaries had 13,35614,944 full-time and 27,28332,081 part-time employees at February 2, 2013.January 30, 2016. The Company considers employee relations to be satisfactory.

Competition

Financial information concerning competition is contained under the “Business Risk” section in theFinancial Instruments and Risk Management note in “Item 8. Consolidated Financial Statements and Supplementary Data.”

Merchandise Purchases

Financial information concerning merchandise purchases is contained under the “Liquidity” section in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and under the “Business Risk” section in theFinancial Instruments and Risk Management note in “Item 8. Consolidated Financial Statements and Supplementary Data.”

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Item 1A.  Risk Factors

The statements contained in this Annual Report on Form 10-K (“Annual Report”) that are not historical facts, including, but not limited to, statements regarding our expected financial position, business and financing plans found in “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Please also see “Disclosure Regarding Forward-Looking Statements.” Our actual results may differ materially due to the risks and uncertainties discussed in this Annual Report, including those discussed below. Additional risks and uncertainties that we do not presently know about or that we currently consider to be insignificant may also affect our business operations and financial performance.

Our inability to implement our strategic long range plan may adversely affect our future results.

Our ability to successfully implement and execute our long rangelong-range plan is dependent on many factors. Our strategies may require significant capital investment and management attention, which may result in the diversion of these resources from our core business and other business issues and opportunities. Additionally, any new initiative is subject to certain risks including customer acceptance of our products and renovated store design,designs, competition, product differentiation, and the ability to attract and retain qualified personnel. If we cannot successfully execute our strategic growth initiatives or if the long rangelong-range plan does not adequately address the challenges or opportunities we face, our financial condition and results of operations may be adversely affected. Additionally, failure to meet market expectations, particularly with respect to sales, operating margins, and earnings per share, would likely result in volatility in the market value of our stock.

The businesses in which we operate are highly competitive.

The retail athletic footwear and apparel business is highly competitive with relatively low barriers to entry. competitive.

Our athletic footwear and apparel operations compete primarily with athletic footwear specialty stores, sporting goods stores, and superstores, department stores, discount stores, traditional shoe stores, and mass merchandisers, and Internet retailers, many of which are units of national or regional chains that have significant financial and marketing resources. The principal competitive factors in our markets are selection of merchandise, reputation, store location, price, quality, advertising, price, and customer service. Our success also depends on our ability to differentiate ourselves from our competitors with respect to shopping convenience, a quality merchandise assortment of available merchandise and superior customer service. We cannot assure that we will continue to be able to compete successfully against existing or future competitors. Our expansion into markets served by our competitors, and entry of new competitors or expansion of existing competitors into our markets, could have a material adverse effect on our business, financial condition, and results of operations.

Although we sell merchandise via the Internet, a significant shift in customer buying patterns to purchasing athletic footwear, athletic apparel, and sporting goods via the Internet could have a material adverse effect on our business results. In addition, all of our significant vendorssuppliers operate retail stores and distribute products directly through the Internet and others may follow. Some vendors operate retail stores and some have indicated that further retail stores and venues will open. Should this continue to occur, and if our customers decide to purchase directly from our vendors,suppliers, it could have a material adverse effect on our business, financial condition, and results of operations.

The industry in which we operate is dependent upon fashion trends, customer preferences, product innovations, and other fashion-related factors.

The athletic footwear and apparel industry is subject to changing fashion trends and customer preferences. In addition, retailers in the athletic industry rely on their suppliers to maintain innovation in the products they develop. We cannot guarantee that our merchandise selection will accurately reflect customer preferences when it is offered for sale or that we will be able to identify and respond quickly to fashion changes, particularly given the long lead times for ordering much of our merchandise from vendors.suppliers. A substantial portion of our highest margin sales are to young males (ages 12 – 25), many of whom we believe purchase athletic footwear and athletic and licensed apparel as a fashion statement and are frequent purchasers. Any shiftOur failure to anticipate, identify or react appropriately in a timely manner to changes in fashion trends that would make athletic footwear or athletic and licensed apparel less attractive to these customers could have a material adverse effect on our business, financial condition, and results of operations.

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If we do not successfully manage our inventory levels, our operating results will be adversely affected.

We must maintain sufficient inventory levels to operate our business successfully. However, we also must guard against accumulating excess inventory. For example, we order the bulkmost of our athletic footwear four to six months prior to delivery to our stores. If we fail to anticipate accurately either the market for the merchandise in our stores or our customers’ purchasing habits, we may be forced to rely on markdowns or promotional sales to dispose of excess or slow moving inventory, which could have a material adverse effect on our business, financial condition, and results of operations.

A change in the relationship with any of our key vendorssuppliers or the unavailability of our key products at competitive prices could affect our financial health.

Our business is dependent to a significant degree upon our ability to obtain exclusive product and the ability to purchase brand-name merchandise at competitive prices from a limited number of vendors.suppliers. In addition, our vendorssuppliers provide volume discounts, cooperative advertising, and markdown allowances, as well as the ability to negotiate returns of excess or unneeded merchandise. We cannot be certain that such assistance fromterms with our vendorssuppliers will continue in the future.

The Company purchased approximately 8690 percent of its merchandise in 20122015 from its top five vendorssuppliers and expects to continue to obtain a significant percentage of its athletic product from these vendorssuppliers in future periods. Approximately 6572 percent of all merchandise purchased in 2015 was purchased from one vendorsupplier — Nike, Inc. (“Nike”). Each of our operating divisions is highly dependent on Nike; they individually purchased 4855 to 7782 percent of their merchandise from Nike. Merchandise that is high profile and in high demand is allocated by our vendorssuppliers based upon their internal criteria. Although we have generally been able to purchase sufficient quantities of this merchandise in the past, we cannot be certain that our vendorssuppliers will continue to allocate sufficient amounts of such merchandise to us in the future. Our inability to obtain merchandise in a timely manner from major suppliers (particularly Nike) as a result of business decisions by our suppliers or any disruption in the supply chain could have a material adverse effect on our business, financial condition, and results of operations. Because of our strong dependence on Nike, any adverse development in Nike’s reputation, financial condition or results of operations or the inability of Nike to develop and manufacture products that appeal to our target customers could also have an adverse effect on our business, financial condition, and results of operations. We cannot be certain that we will be able to acquire merchandise at competitive prices or on competitive terms in the future.

These risks could have a material adverse effect on our business, financial condition, and results of operations.

We depend on mall traffic and our ability to secure suitable store locations.

Our stores in the United States and Canada are located primarily in enclosed regional and neighborhood malls. Our sales are dependent, in part, on the volume of mall traffic. Mall traffic may be adversely affected by, among other factors, economic downturns, the closing of anchor department stores and/or specialty stores, and a decline in the popularity of mall shopping among our target customers. Further, any terrorist act, natural disaster, or public health or safety concern that decreases the level of mall traffic, or that affects our ability to open and operate stores in affected areas, could have a material adverse effect on our business.

To take advantage of customer traffic and the shopping preferences of our customers, we need to maintain or acquire stores in desirable locations such as in regional and neighborhood malls anchored by major department stores. We cannot be certain that desirable mall locations will continue to be available.available at favorable rates. Some traditional enclosed malls are experiencing significantly lower levels of customer traffic, driven by the overall poor economic conditions as well as the closure of certain mall anchor tenants.

Several large landlords dominate the ownership of prime malls, particularly in the United States, Canada, and Canada,Australia, and because of our dependence upon these landlords for a substantial number of our locations, any significant erosion of their financial condition or our relationships with these landlords would negatively affect our ability to obtain and retain store locations. Additionally, further landlord consolidation may negatively affect our ability to negotiate favorable lease terms.

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We may experience fluctuations in and cyclicality of our comparable-store sales results.

Our comparable-store sales have fluctuated significantly in the past, on both an annual and a quarterly basis, and we expect them to continue to fluctuate in the future. A variety of factors affect our comparable-store sales results, including, among others, fashion trends, product innovation, the highly competitive retail store sales environment, economic conditions, timing of promotional events, changes in our merchandise mix, calendar shifts of holiday periods, supply chain disruptions, and weather conditions. Many of our products particularly high-end athletic footwear and athletic and licensed apparel, represent discretionary purchases. Accordingly, customer demand for these products could decline in a recession or if our customers develop other priorities for their discretionary spending. These risks could have a material adverse effect on our business, financial condition, and results of operations.

Our operations may be adversely affected by economicEconomic or political conditions in other countries.countries, including fluctuations in foreign currency exchange rates and tax rates may adversely affect our operations.

A significant portion of our sales and operating income for 20122015 was attributable to our operations in Europe, Canada, Australia, and New Zealand. As a result, our business is subject to the risks associated with doing business outside of the United States such as foreignlocal customer product preferences, political unrest, disruptions or delays in shipments, changes in economic conditions in countries in which we operate, foreign currency fluctuations, real estate costs, and labor and employment practices in non-U.S. jurisdictions that may differ significantly from those that prevail in the United States.

In addition, because we and our suppliers have a substantial amount of our products manufactured in foreign countries, our ability to obtain sufficient quantities of merchandise on favorable terms may be affected by governmental regulations, trade restrictions, and economic, labor, and other conditions in the countries from which our suppliers obtain their product.

Fluctuations in the value of the euro may affect the value of our European earnings when translated into U.S. dollars. Similarly our earnings in Canada, Australia, and New Zealand may be affected by the value of currencies when translated into U.S. dollars. Our operating results may be adversely affected by significant changes in these foreign currencies relative to the U.S. dollar. For the most part, our international subsidiaries transact in their functional currency, other than in the U.K., whose inventory purchases are denominated in euro, which could result in foreign currency transaction gains or losses.

Our products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions. Fluctuations in tax rates and duties and changes in tax legislation or regulation could have a material adverse effect on our results of operations and financial condition.

Fluctuations in the value of the euro may affect the value of our European earnings when translated into U.S. dollars. Although we enter into forward foreign exchange contracts and option contracts to reduce the effect of foreign currency exchange rate fluctuations, our operations may be adversely affected by significant changes in the foreign currencies relative to the U.S. dollar.

Macroeconomic developments may adversely affect our business.

Our performance is subject to global economic conditions and the related impact on consumer spending levels. Continued uncertainty about global economic conditions poses a risk as consumers and businesses postpone spending in response to tighter credit, unemployment, negative financial news, and/or declines in income or asset values, which could have a material negative effect on demand for our products.

As a retailer that is dependent upon consumer discretionary spending, our results of operations are sensitive to changes in macroeconomic conditions. Our customers may have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies, increased fuel and energy costs, higher interest rates, higher taxes, reduced access to credit, and lower home prices.values. There is also a risk that if negative economic conditions persist for a long period of time or worsen, consumers may make long-lasting reductions to their discretionary purchasing behavior. These and other economic factors could adversely affect demand for our products, and services andwhich could adversely affect our financial condition and operating results.

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We rely on a few key vendorssuppliers for a majority of our merchandise purchases (including a significant portion from one key vendor)supplier). The inability of key suppliers to access liquidity, or the insolvency of key suppliers, could lead to their failure to deliver merchandise to us. Our inability to obtain merchandise in a timely manner from major suppliers could have a material adverse effect on our business, financial condition, and results of operations.

Material changes in the market value of the securities we hold may adversely affect our results of operations and financial condition.

At February 2, 2013,January 30, 2016, our cash and cash equivalents and short-term investments totaled $928$1,021 million. The majority of our investments were short-term deposits in highly-rated banking institutions. As of February 2, 2013, we had $543January 30, 2016, $608 million of our cash and cash equivalents were held in foreign jurisdictions. We regularly monitor our counterparty credit risk and mitigate our exposure by making short-term investments only in highly-rated institutions and by limiting the amount we invest in any one institution. We continually monitor the creditworthiness of our counterparties. At February 2, 2013,January 30, 2016, almost all of the investments were in institutions rated A or better from a major credit rating agency. Despite those ratings, it is possible that the value or liquidity of our investments may decline due to any number of factors, including general market conditions and bank-specific credit issues.

Our U.S. pension plan trust holds assets totaling $585$544 million at February 2, 2013.January 30, 2016. The fair values of these assets held in the trust are compared to the plan’s projected benefit obligation to determine the pension funding liability. We attempt to mitigate funding risk through asset diversification, and we regularly monitor investment risk of our portfolio through quarterly investment portfolio reviews and periodic asset and liability studies. Despite these measures, it is possible that the value of our portfolio may decline in the future due to any number of factors, including general market conditions and credit issues. Such declines could have an impact on the funded status of our pension plansplan and future funding requirements.

If our long-lived assets, goodwill or other intangible assets become impaired, we may need to record significant non-cash impairment charges.

We review our long-lived assets, goodwill and other intangible assets when events indicate that the carrying value of such assets may be impaired. Goodwill and other indefinite lived intangible assets are reviewed for impairment if impairment indicators arise and, at a minimum, annually. We determine fair value basedAs of January 30, 2016, we had $156 million of goodwill; this asset is not amortized but is subject to an impairment test, which consists of either a qualitative assessment on a combinationreporting unit level, or a two-step impairment test, if necessary. The determination of a discounted cash flow approach and market-based approach. If an impairment triggercharges is identified, the carrying value is compared to its estimated fair value and provisions for impairment are recorded as appropriate. Impairment losses are significantly affected by estimates of future operating cash flows and estimates of fair value. Our estimates of future operating cash flows are identified from our strategic long-range plans, which are based upon our experience, knowledge, and expectations; however, these estimates can be affected by factors such factors as our future operating results, future store profitability, and future economic conditions, all of which can be difficult to predict accurately. Any significant deterioration in macroeconomic conditions could affect the fair value of our long-lived assets, goodwill, and other intangible assets and could result in future impairment charges, which would adversely affect our results of operations.

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The effects of natural disasters, terrorism, acts of war, and public health issues may adversely affect our business.

Natural disasters, including earthquakes, hurricanes, floods, and tornados may affect store and distribution center operations. In addition, acts of terrorism, acts of war, and military action both in the United States and abroad can have a significant effect on economic conditions and may negatively affect our ability to purchase merchandise from vendorssuppliers for sale to our customers. Public health issues, such as flu or other pandemics, whether occurring in the United States or abroad, could disrupt our operations and result in a significant part of our workforce being unable to operate or maintain our infrastructure or perform other tasks necessary to conduct our business. Additionally, public health issues may disrupt, the operations of our suppliers, our operations, our customers, or have an adverse effect on, our suppliers’ operations, our operations, our customers, or customer demand. Our ability to mitigate the adverse impact of these events depends, in part, upon the effectiveness of our disaster preparedness and response planning as well as business continuity planning. However, we cannot be certain that our plans will be adequate or implemented properly in the event of an actual disaster. We may be required to suspend operations in some or all of our locations, which could have a material adverse effect on our business, financial condition, and results of operations. Any significant declines in public safety or uncertainties regarding future economic prospects that affect customer spending habits could have a material adverse effect on customer purchases of our products.

Manufacturer compliance with our social compliance program requirements.

We require our independent manufacturers to comply with our policies and procedures, which cover many areas including labor, health and safety, and environmental standards. We monitor compliance with our policies and procedures using internal resources, as well as third-party monitoring firms. Although we monitor their compliance with these policies and procedures, we do not control the manufacturers or their practices. Any failure of our independent manufacturers to comply with our policies and procedures or local laws in the country of manufacture could disrupt the shipment of merchandise to us, force us to locate alternate manufacturing sources, reduce demand for our merchandise, or damage our reputation.

Complications in our distribution centers and other factors affecting the distribution of merchandise may affect our business.

We operate fourmultiple distribution centers worldwide to support our businesses. In addition to the distribution centers that we operate, we have third-party arrangements to support our operations in the U.S.,United States, Canada, Australia, and New Zealand. If complications arise with any facility or if any facility is severely damaged or destroyed, our other distribution centers may not be ableunable to support the resulting additional distribution demands. ThisWe may be affected by disruptions in the global transportation network such as a port strike, weather conditions, work stoppages or other labor unrest. These factors may adversely affect our ability to deliver inventory on a timely basis. We depend upon third-party carriers for shipment of a significant amount of merchandise. An interruption in service by these carriers for any reason could cause temporary disruptions in our business, a loss of sales and profits, and other material adverse effects.

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Our business involves the storage and transmission of customers’ personal information, such asincluding consumer preferences and credit card information. In an effort to enhance the security of our customers’ credit card information, during 2015 we implemented an encryption and tokenization platform for certain credit card transactions, whereby no credit card data is stored in our internal systems, with plans to expand this platform to the entire Company. We invest in industry-standard security technology to protect the Company’sdata stored by the Company, including our data and business processes, against the risk of data security breaches and cyber-attacks. Our data security management program includes identity, trust, vulnerability and threat management business processes, as well as enforcement of standard data protection policies such as Payment Card Industry compliance. We measure our data security effectiveness through industry accepted methods and remediate critical findings. Additionally, we certify our major technology suppliers and any outsourced services through accepted security certification measures. We maintain and routinely test backup systems and disaster recovery, along with external network security penetration testing by an independent third party as part of our business continuity preparedness. We also maintain an IT Security Incident Response Plan and routinely perform a table-top exercise with key IT and business stakeholders.

While we believe that our security technology and processes are adequatefollow leading practices in preventingthe prevention of security breaches and in reducing cyber securitythe mitigation of cybersecurity risks, given the ever-increasing abilities of those intent on breaching cyber securitycybersecurity measures and given the necessity of our reliance on the security and other effortsprocedures of third-party vendors, the total security effort at any point in time may not be completely effective, and anyeffective. Any such security breaches and cyber incidents could adversely affect our business. Failure of our systems, including failures due to cyber-attacks that would prevent the ability of systems to function as intended, could cause transaction errors, loss of customers and sales, and could have negative consequences to us, our employees, and those with whom we do business. Any security breach involving the misappropriation, loss, or other unauthorized disclosure of confidential information by us could also severely damage our reputation, expose us to the risks of litigation and liability, increase operating costs associated with remediation, and harm our business. While we carry insurance that would mitigate the losses, to an extent, such insurance may be insufficient to compensate us for potentially significant losses.

Risks associated with digital operations.

Our digital operations are subject to numerous risks, including risks related to the failure of the computer systems that operate our websites and mobile sites and their related support systems, computer viruses, telecommunications failures, denial of service attacks, and similar disruptions. Also, we may require additional capital in the future to sustain or grow our digital commerce. Business risks related to digital commerce include risks associated with the need to keep pace with rapid technological change, Internet securitycybersecurity risks, risks of system failure or inadequacy, governmental regulation, and legal uncertainties with respect to the Internet regulatory compliance, and collection of sales or other taxes by additional states or foreign jurisdictions. If any of these risks materializes, it could have a material adverse effect on our business.

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depends to a significant extent both upon the continued services of our current executive and senior management team, as well as our ability to attract, hire, motivate, and retain additional qualified management in the future. Competition

While we feel that we have adequate succession planning and executive development programs, competition for key executives in the retail industry is intense, and our operations could be adversely affected if we cannot retain and attract qualified executives.

Risks associated with attracting and retain qualifiedretaining store and field associates.

Many of the store and field associates are in entry level or part-time positions withwhich, historically, have had high rates of turnover. Our ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation, and changing demographics. If we are unable to attract and retain quality associates, our ability to meet our growth goals or to sustain expected levels of profitability may be compromised. In addition, a largeOur ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation, overtime regulations, and changing demographics.

Changes in employment laws or regulation could harm our performance.

Various foreign and domestic labor laws govern our relationship with our employees and affect our operating costs. These laws include minimum wage requirements, overtime pay, paid time off, work scheduling, healthcare reform and the implementation of the Patient Protection and Affordable Care Act, unemployment tax rates, workers’ compensation rates, works council requirements, and union membership. A number of our retail employees are paid the prevailing minimum wage, which if increased would negativelyfactors could adversely affect our profitability.

We face risks arisingoperating results, including additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits, and changing regulations from recent activity by the National Labor Relations Board in the United States.

The National Labor Relations Board continually considers changes to labor regulations, many of which could significantly affect the nature of labor relations in the U.S. and how union elections and contract negotiations are conducted. In 2011, the National Labor Relations Board’s definition of a bargaining unit changed, making it possible for smaller groups of employees to organize labor unions. Furthermore, recent regulations may streamline the election process, shortening the time between the filing of a petition and an election being held. These regulations and recent decisions could impose more labor relations requirements and union activity on our business conducted in the United States, thereby potentially increasing our costs, which could negatively affect our profitability.

Health care reform could adversely affect our business.

In 2010, Congress enacted comprehensive health care reform legislation which, amongor other things, includes guaranteed coverage requirements, eliminates pre-existing condition exclusions and annual and lifetime maximum limits, restricts the extent to which policies can be rescinded, and imposes new and significant taxes on health insurers and health care benefits. Due to the breadth and complexity of the health reform legislation and the large number of eligible employees who currently choose not to participate in our plans, it is difficult to predict the overall effect of the statute and related regulations on our business over the coming years. Eligible employees who currently choose not to participate in our healthcare plans may find it more advantageous to do so when recent changes to healthcare laws in the United States become effective in 2014. Such changes include tax penalties to persons for not obtaining healthcare coverage and being ineligible for certain healthcare subsidies if an employee is eligible for healthcare coverage under an employer's plan. If a large number of current eligible employees, who currently choose not to participate in our plans, choose to enroll when, or after, the law becomes effective, it may significantly increase our healthcare coverage costs and negatively affect our financial results.agencies.

Legislative or regulatory initiatives related to global warming/climate change concerns may negatively affect our business.

There has been an increasing focus and significant debate on global climate change, recently, including increased attention from regulatory agencies and legislative bodies globally.bodies. This increased focus may lead to new initiatives directed at regulating an as-yet unspecified array of environmental matters. Legislative, regulatory, or other efforts in the United States to combat climate change could result in future increases in taxes or in the cost of transportation and utilities, which could decrease our operating profits and could necessitate future additional investments in facilities and equipment. We are unable to predict the potential effects that any such future environmental initiatives may have on our business.

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Our continued expansion outside the U.S.,United States, including in developing countries, could increase the risk of suchFCPA violations in the future. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations or financial condition.

Failure to fully comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, the price of our common stock and market confidence in our reported financial information.information, and the price of our common stock.

We continue to document, test, and monitor our internal controls over financial reporting in order to satisfy all of the requirements of Section 404 of the Sarbanes-Oxley Act of 2002; however, we cannot be assured that our disclosure controls and procedures and our internal controls over financial reporting will prove to be completely adequate in the future. Failure to fully comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, the price of our common stock, and market confidence in our reported financial information.information, and the price of our common stock.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

The properties of the Company and its consolidated subsidiaries consist of land, leased stores, administrative facilities, and distribution centers. Gross square footage and total selling area for the Athletic Stores segment at the end of 20122015 were approximately 12.3212.92 and 7.267.58 million square feet, respectively. These properties, which are primarily leased, are located in the United States and its territories, Canada, various European countries, Australia, and New Zealand.

The Company currently operates fourfive distribution centers, of which two are owned and twothree are leased, occupying an aggregate of 2.52.9 million square feet. Three of the four distribution centers are located in the United States, one in Germany, and one is in the Netherlands. The location in Germany relates to the central warehouse distribution centers for the Runners Point Group store locations, as well as a distribution center for its direct-to-customer business. During 2014, we opened a new distribution center in Germany which provides us with increased capacity that will enable us to support the planned growth of both the store and direct-to-customer businesses. This larger distribution center also allowed us to consolidate the previous two locations in Germany during 2015.

We also own a cross-dock and manufacturing facility and operate a leased manufacturing facilitywarehouse in the U.S.,United States, both of which we operate in support of our Team Edition apparel business.

Item 3.  Legal Proceedings

Information regarding the Company’s legal proceedings is contained in theLegal Proceedings note under “Item 8. Consolidated Financial Statements and Supplementary Data.”

Item 4.  Mine Safety Disclosures

Not applicable.

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Ken C. Hicks,Richard A. Johnson, age 60,58, has served as Chairman of the Board since January 31, 2010 and President and Chief Executive Officer since August 17, 2009.December 1, 2014. Mr. Hicks served as President and Chief Merchandising Officer of J.C. Penney Company, Inc. (“JC Penney”) from 2005 through 2009. He was President and Chief Operating Officer of Stores and Merchandise Operations of JC Penney from 2002 through 2004, and he served as President of Payless ShoeSource, Inc. from 1999 to 2002. Mr. Hicks is also a director of Avery Dennison Corporation.

Richard A. Johnson age 55, has previously served as Executive Vice President and Chief Operating Officer sincefrom May 16, 2012.2012 through November 30, 2014. He served as Executive Vice President and Group President from July 2011 to May 15, 2012; President and Chief Executive Officer of Foot Locker U.S., Lady Foot Locker, Kids Foot Locker, and Footaction from January 2010 to July 2011; President and Chief Executive Officer of Foot Locker Europe from August 2007 to January 2010; and President and Chief Executive Officer of Footlocker.com/Eastbay from April 2003 to August 2007.

Stephen D. Jacobs, age 53, has served as Executive Vice President and Chief Executive Officer North America since February 29, 2016. Mr. Johnson is a directorJacobs has been with the Company for 18 years in positions of Maidenform Brands, Inc.increasing responsibility. Mr. Jacobs previously served as Executive Vice President and Chief Executive Officer Foot Locker North America from December 1, 2014 through February 28, 2016. He served as President and Chief Executive Officer of Foot Locker U.S., Lady Foot Locker, Kids Foot Locker, and Footaction from July 2011 to November 2014 and President and Chief Executive Officer of Champs Sports from January 2009 to June 2011.

Lewis P. Kimble, age 57,has served as Executive Vice President and Chief Executive Officer International since February 29, 2016. Mr. Kimble previously served as President and Chief Executive Officer of Foot Locker Europe from February 1, 2010 to February 28, 2016. Prior to that role Mr. Kimble led our business in Australia and New Zealand as Managing Director of Foot Locker Asia Pacific. Over his almost 40 years with the Company, Mr. Kimble has also held Vice President positions across multiple functions within the United States and Europe.

Robert W. McHugh, age 54,57, has served as Executive Vice President — Operations Support since July 2011. He served as Executive Vice President and Chief Financial Officer from May 2009 to July 2011; and Senior Vice President and Chief Financial Officer from November 2005 through April 2009.2011.

Lauren B. Peters, age 51,54, has served as Executive Vice President and Chief Financial Officer since July 2011. She served as Senior Vice President — Strategic Planning from April 2002 to July 2011.

Gary M. Bahler,Paulette R. Alviti,age 61,45, has served as Senior Vice President and Chief Human Resources Officer since August 1998, General Counsel sinceJune 2013. From March 2010 to May 2013, Ms. Alviti served in various roles at PepsiCo, Inc.: SVP and Chief Human Resources Officer Asia, Middle East, Africa (February to May 2013); SVP Global Talent Acquisition and Deployment (July 2012 to February 19932013); and Secretary since February 1990.SVP — Human Resources (March 2010 to July 2012). From March 2008 to March 2010, she served as VP — Human Resources of The Pepsi Bottling Group, Inc.

Jeffrey L. Berk, age 57,60, has served as Senior Vice President — Real Estate since February 2000.

Peter D. Brown, age 58, has served as Senior Vice President and Chief Information Officer since February 2011. He served as Senior Vice President, Chief Information Officer and Investor Relations from September 2006 to February 2011; and as Vice President — Investor Relations and Treasurer from October 2001 to September 2006.

Giovanna Cipriano, age 43,46, has served as Senior Vice President and Chief Accounting Officer since May 2009. Ms. Cipriano served as Vice President and Chief Accounting Officer from November 2005 through April 2009.

Laurie J. Petrucci,Sheilagh M. Clarke, age 54,56, has served as Senior Vice President, — Human ResourcesGeneral Counsel and Secretary since June 1, 2014. She previously served as Vice President, Associate General Counsel and Assistant Secretary from May 2001.2007 to May 2014.

Pawan Verma, age 39, has served as Senior Vice President and Chief Information Officer since August 10, 2015. From February 2013 to July 2015, Mr. Verma served in various technology leadership roles at Target Corporation ranging from enterprise architecture, eCommerce, Mobile and digital, with his most recent role as Vice President-Digital Technology and API Platforms. From March 2011 to January 2013, he served as Sr. Director, eCommerce, Digital and Mobile of Convergys Corporation. He also served in various technology leadership roles at Verizon Wireless between October 2003 and February 2011.

John A. Maurer, age 53,56, has served as Vice President, Treasurer and Investor Relations since February 2011. Mr. Maurer served as Vice President and Treasurer from September 2006 to February 2011. He served as Divisional Vice President and Assistant Treasurer from April 2006 to September 2006.

There are no family relationships among the executive officers or directors of the Company.

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PART II

Foot Locker, Inc. common stock (ticker symbol “FL”) is listed on The New York Stock Exchange as well as on the Börse Stuttgart stock exchange in Germany. As of February 2, 2013,January 30, 2016, the Company had 17,04714,237 shareholders of record owning 150,069,929136,976,809 common shares.

The following table provides for the period indicated, the intra-day high and low sales prices for the Company’s common stock:stock for the periods indicated below:

		2012								2011								2015								2014
		High				Low				High				Low				High				Low				High				Low
1st Quarter		$	32.27			$	26.00			$	22.03			$	17.21			$	63.66			$	52.12			$	48.71			$	36.65
2nd Quarter			34.00				27.86				25.50				21.00				71.07				60.14				52.07				46.20
3rd Quarter			37.65				32.51				23.02				16.66				77.25				63.02				58.40				47.90
4th Quarter			36.09				31.07				26.82				20.82				69.99				57.23				59.19				51.12

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Performance Graph

The following graph below compares the cumulative five-year total return to shareholders (common stock price appreciation plus dividends, on a reinvested basis) on Foot Locker, Inc.’s common stock relative to the total returns of the S&P 400 Retailing Index and the Russell Midcap Index.

The following Performance Graph and related information shall not be deemed “soliciting material” or to be filed with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

Indexed Share Price Performance

		1/29/2011				1/28/2012				2/2/2013				2/1/2014				1/31/2015				1/30/2016
Foot Locker, Inc.		$	100.00			$	153.23			$	204.76			$	233.92			$	328.29			$	423.20
S&P 400 Retailing Index		$	100.00			$	121.84			$	150.82			$	170.21			$	206.94			$	181.10
Russell Midcap Index		$	100.00			$	103.82			$	123.03			$	150.86			$	171.46			$	158.80

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Item 6. Selected Financial Data

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA

The selected financial data below should be read in conjunction with the Consolidated Financial Statements and the Notes thereto and other information contained elsewhere in this report.

($ in millions, except per share amounts)		2012(1)				2011				2010				2009				2008
Summary of Continuing Operations
																						2015				2014				2013				2012(1)				2011
																							(in millions, except per share amounts)
Summary of Operations
Sales		$	6,182				5,623				5,049				4,854				5,237			$	7,412				7,151				6,505				6,182				5,623
Gross margin			2,034				1,796				1,516				1,332				1,460				2,505				2,374				2,133				2,034				1,796
Selling, general and administrative expenses			1,294				1,244				1,138				1,099				1,174				1,415				1,426				1,334				1,294				1,244
Impairment and other charges			12				5				10				41				259
Litigation, impairment and other charges																							105				4				2				12				5
Depreciation and amortization			118				110				106				112				130				148				139				133				118				110
Interest expense, net			5				6				9				10				5				4				5				5				5				6
Other income			(2	)			(4	)			(4	)			(3	)			(8	)			(4	)			(9	)			(4	)			(2	)			(4	)
Income (loss) from continuing operations, after-tax			397				278				169				47				(79	)
Net income																							541				520				429				397				278
Per Common Share Data
Basic earnings			2.62				1.81				1.08				0.30				(0.52	)			3.89				3.61				2.89				2.62				1.81
Diluted earnings			2.58				1.80				1.07				0.30				(0.52	)			3.84				3.56				2.85				2.58				1.80
Common stock dividends declared per share			0.72				0.66				0.60				0.60				0.60				1.00				0.88				0.80				0.72				0.66
Weighted-average Common Shares Outstanding
Basic earnings			151.2				153.0				155.7				156.0				154.0				139.1				143.9				148.4				151.2				153.0
Diluted earnings			154.0				154.4				156.7				156.3				154.0				140.8				146.0				150.5				154.0				154.4
Financial Condition
Cash, cash equivalents, and short-term investments		$	928				851				696				589				408			$	1,021				967				867				928				851
Merchandise inventories			1,167				1,069				1,059				1,037				1,120				1,285				1,250				1,220				1,167				1,069
Property and equipment, net			490				427				386				387				432				661				620				590				490				427
Total assets			3,367				3,050				2,896				2,816				2,877				3,775				3,577				3,487				3,367				3,050
Long-term debt			133				135				137				138				142
Long-term debt and obligations under capital leases																							130				134				139				133				135
Total shareholders’ equity			2,377				2,110				2,025				1,948				1,924				2,553				2,496				2,496				2,377				2,110
Financial Ratios
Sales per average gross square foot(2)		$	443				406				360				333				350			$	504				490				460				443				406
Earnings before interest and taxes (EBIT)(3)			612				441				266				83				(95	)
EBIT margin(3)			9.9	%			7.8				5.3				1.7				(1.8	)
Net income margin(3)			6.4	%			4.9				3.3				1.0				(1.5	)
SG&A as a percentage of sales																							19.1	%			19.9				20.5				20.9				22.1
Earnings before interest and taxes (EBIT)																						$	841				814				668				612				441
EBIT margin																							11.3	%			11.4				10.3				9.9				7.8
EBIT margin (non-GAAP)(3)																							12.8	%			11.4				10.4				9.9				7.9
Net income margin																							7.3	%			7.3				6.6				6.4				4.9
Net income margin (non-GAAP)(3)																							8.2	%			7.3				6.6				6.2				5.0
Return on assets (ROA)			12.4	%			9.4				5.9				1.7				(2.6	)			14.7	%			14.7				12.5				12.4				9.4
Return on invested capital (ROIC)(4)			14.2	%			11.8				8.3				5.3				5.4
Net debt capitalization percent(5)			37.2	%			36.0				39.0				43.0				46.7
Return on invested capital (ROIC)(3)																							15.8	%			15.0				14.1				14.2				11.8
Net debt capitalization percent(3),(4)																							47.4	%			43.4				42.5				37.2				36.0
Current ratio			3.7				3.8				4.0				4.1				4.2				3.7				3.5				3.8				3.7				3.8
Other Data
Capital expenditures		$	163				152				97				89				146			$	228				190				206				163				152
Number of stores at year end			3,335				3,369				3,426				3,500				3,641				3,383				3,423				3,473				3,335				3,369
Total selling square footage at year end (in millions)			7.26				7.38				7.54				7.74				8.09				7.58				7.48				7.47				7.26				7.38
Total gross square footage at year end (in millions)			12.32				12.45				12.64				12.96				13.50				12.92				12.73				12.71				12.32				12.45

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Foot Locker, Inc., through its subsidiaries, operates in two reportable segments — Athletic Stores and Direct-to-Customers. The Athletic Stores segment is one of the largest athletic footwear and apparel retailers in the world, whosewith formats that include Foot Locker, Lady Foot Locker, SIX:02, Kids Foot Locker, Champs Sports, Footaction, Runners Point and CCS.Sidestep. The Direct-to-Customers segment includes Footlocker.com, Inc. and other affiliates, including Eastbay, Inc., and CCS,our international ecommerce businesses, which sell to customers through their Internet websites,and mobile devices,sites and catalogs.

The Foot Locker brand is one of the most widely recognized names in the markets in which the Company operates, epitomizing highpremium quality for the active lifestyle customer. This brand equity has aided the Company’s ability to successfully develop and increase its portfolio of complementary retail store formats, such as Lady Foot Locker, Footaction and Kids Foot Locker, as well as Footlocker.com, its direct-to-customersdirect-to-customer business. Through various marketing channels, including broadcast, digital, social, print, and various sports sponsorships and events, the Company reinforces its image with a consistent message-message — namely, that it is the destination for athletically inspired shoes and apparel with a wide selection of merchandise in a full-service environment.

Store Profile

																						Square Footage																												Square Footage
		January 28, 2012				Opened				Closed				February 2, 2013				Relocations/Remodels				(in thousands)																												(in thousands)
																						Selling				Gross				January 31, 2015				Opened				Closed				January 30, 2016				Relocations/ Remodels				Selling				Gross
Foot Locker US			1,118				9				55				1,072				58				2,515				4,311				1,015				8				52				971				54				2,451				4,234
Foot Locker Europe			561				39				10				590				41				808				1,770				603				16				13				606				34				863				1,884
Foot Locker Canada			129				2				2				129				9				264				406				126				1				2				125				8				279				435
Foot Locker Asia Pacific			91				3				2				92				5				128				206				91				4				1				94				6				128				210
Lady Foot Locker			331				1				29				303				17				398				685				198				—				42				156				—				208				352
SIX:02																															15				15				—				30				—				62				101
Kids Foot Locker			291				18				4				305				13				421				727				357				27				10				374				44				602				1,029
Footaction			292				1				10				283				18				817				1,299				272				13				17				268				20				800				1,303
Champs Sports			534				12				7				539				37				1,876				2,861				547				10				7				550				41				1,947				2,972
CCS			22				—				—				22				—				34				51
Runners Point																															116				10				5				121				2				158				259
Sidestep																															83				7				2				88				—				82				139
Total			3,369				85				119				3,335				198				7,261				12,316				3,423				111				151				3,383				209				7,580				12,918

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SIX:02 — “It’s Your Time” — SIX:02 is an elevated retail concept designed for the modern woman, featuring top brands in athletic-inspired style. The apparel, footwear, and accessories assortments are carefully curated to inspire her best self-expression — in the gym and out of it. This banner has unique local fitness and fashion partners in each market and also leverages top celebrity and social influencers to connect meaningfully to all aspects of a woman’s life. SIX:02 operates 30 stores in the United States and have an average of 2,100 selling square feet.

Kids Foot Locker — “Where Kids Come First”“Go Big” — Kids Foot Locker is a national children’syouth athletic retailer that offers the largest selection of brand-name athletic footwear, apparel and accessories for children.young athletes. Its stores feature an environment geared to appeal to both parents and children. Its 305Of its 374 stores, 349 are located in the United States, Puerto Rico, and the U.S. Virgin Islands, 18 in Europe, and 7 in Canada. These stores have an average of 1,4001,600 selling square feet.

Footaction — “Head-to-Toe Sport Inspired Style”“Own It” — Footaction is a national athletic footwear and apparel retailer.retailer that offers the freshest, best edited selection of athletic lifestyle brands and looks. This banner is uniquely positioned at the intersection of sport and style. The primary customer is a style-obsessed, confident, influential young male who is driven by style and is always thoughtful about his look.dressed to impress. Its 283268 stores are located throughout the United States and Puerto Rico and focus on marquee footwear and branded apparel.authentic, premium product. The Footaction stores have an average of 2,9003,000 selling square feet.

Champs Sports — “We Know Game” — Champs Sports is one of the largest mall-based specialty athletic footwear and apparel retailers in North America. Its product categories include athletic footwear and apparel, and sport-lifestyle inspired accessories. This assortment allows Champs Sports to differentiate itself from other mall-based stores by presenting complete head-to-toe merchandising stories representing the most powerful athletic brands, sports teams, and athletes in North America. Its 539Of its 550 stores, 519 are located throughout the United States, Canada, Puerto Rico, and the U.S. Virgin Islands.Islands and 31 in Canada. The Champs Sports stores have an average of 3,500 selling square feet.

CCSRunners Point — “Your Way, Our Passion” — AsRunners Point specializes in running footwear, apparel, and equipment for performance and lifestyle purposes. Its 121 stores are located in Germany, Austria and Switzerland. This banner caters to local running communities providing technical products, training tips and access to local running and group events. The Runners Point stores have an average of February 2, 2013, we operated 221,300 selling square feet.

Sidestep — “Sneaker Lifestyle” — Sidestep is a predominantly sports fashion footwear banner. Its 88 stores are located in Germany, Austria, the United States. During the first quarterNetherlands, and Switzerland. Sidestep caters to a more discerning, fashion consumer. Sidestep stores have an average of 2013, we expect to close all the locations. The CCS brand will be operated solely as an ecommerce business.900 selling square feet.

Direct-to-Customers

The Company’s Direct-to-Customers segment is multi-branded and multi-channeled. This segment sells through its affiliates, directly to customers through its Internet websites,and mobile devices,sites and catalogs. The Direct-to-Customers segment operates the websites for eastbay.com, final-score.com, eastbayteamservices.com, ccs.com, as well aseastbayteamsales.com, and sp24.com. Additionally, this segment includes the websites aligned with the brand names of its store banners (footlocker.com, ladyfootlocker.com, six02.com kidsfootlocker.com, champssports.com, footaction.com, footlocker.ca, footlocker.eu, runnerspoint.com, and champssports.com)sidestep-shoes.com). These sites offer some of the largest online selections of athletically inspired shoes and apparel, while providing a seamless link between ecommerce and store banners.

Eastbay — “First“First Choice forFor Athletes” — Eastbay is among the largest direct marketers in the United States, providing theserious high school athleteand other athletes with a complete sports solution including athletic footwear, apparel, equipment, team licensed, and private-label merchandise.merchandise for a broad range of sports.

CCS — “We are Board Culture” — In 2008, the Company purchased CCS, an Internet and catalog retailer of skateboard equipment, apparel, footwear, and accessories. CCS serves the needs of the 12-20 year old seeking an authentic board lifestyle shop. CCS is anchored in skate but appealing to the surrounding board culture. The CCS format offers board lifestyle merchandise that will fit the needs of the customer all year long and stocks the best selection of both core and lifestyle brands. The retail store operations of CCS are included in the Athletic Stores segment.

Franchise Operations

In 2006, theThe Company entered into ahas two separate ten-year area development agreementagreements with the Alshaya Trading Co. W.L.L.,third parties for the operation of Foot Locker stores located within the Middle East subject to certain restrictions. Additionally,and the Republic of Korea. The franchised stores located in 2007,Germany operate under the Company entered into a ten-year agreement with another third party forRunners Point banner. A total of 64 franchised stores were operating at January 30, 2016, of which 40 were operating in the exclusive right to openMiddle East, 16 in Germany, and operate Foot Locker stores8 in the Republic of Korea.

A total During 2015, the Company completed an acquisition from Futura Sport AG of 42 franchised10 Runners Point and Sidestep stores, which were operating at February 2, 2013.previously franchise stores. Royalty income from the franchised stores was not significant for any of the periods presented. These stores are not included in the Company’s operating store count above.

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Reconciliation of Non-GAAP Measures

In the following tables, the Company has presented certain financial measures and ratios identified as non-GAAP. The Company believes this non-GAAP information is a useful measure to investors because it allows for a more direct comparison of the Company’s performance for 20122015 as compared with prior years and is useful in assessing the Company’s progress in achieving its long-term financial objectives.

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leases is appropriate. Accordingly, the asset base and net income amounts are adjusted to reflect this in the calculation of ROIC. ROIC, subject to certain adjustments, is also used as a measure in executive long-term incentive compensation.

The closest U.S. GAAP measure is Return on Assets (“ROA”) and is also represented below. ROA increased to 12.4 percent asremained unchanged compared with 9.4 percent in the prior year reflectingyear. Our ROIC improvement is due to an increase in our non-GAAP earnings before interest and income taxes, partially offset by an increase in our average invested capital, primarily related to an increase in capitalized operating leases. This reflected the Company’s overall performance in 2012.inclusion of the new headquarters lease and the effect of opening larger stores supporting the various shop-in-shop initiatives.

		2012				2011				2010				2015				2014				2013
ROA(1)			12.4	%			9.4	%			5.9	%			14.7	%			14.7	%			12.5	%
ROIC % (non-GAAP)(2)			14.2	%			11.8	%			8.3	%			15.8	%			15.0	%			14.1	%

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Overview of Consolidated Results

In March 2012, the Company updated its long-range plan and updated the long-term financial objectives in lightHighlights of our progress in achieving the original objectives established in 2010. Our results and long-term objectives are presented below:

		2012				2011				2010				Long-term Objectives
Sales (in millions)(1)		$	6,101			$	5,623			$	5,049			$	7,500
Sales per gross square foot		$	443			$	406				360			$	500
EBIT margin(1)			9.9	%			7.9	%			5.4	%			11.0	%
Net income margin(1)			6.2	%			5.0	%			3.4	%			7.0	%
ROIC(1)			14.2	%			11.8	%			8.3	%			14.0	%

Excluding the results of the 53^rd week, highlights of our 20122015 financial performance include:

		2012				2011				2010				2015				2014				2013
Sales increase			8.5	%			11.4	%			4.0	%			3.6	%			9.9	%			6.6	%
Comparable-store sales increase			9.4	%			9.8	%			5.8	%			8.5	%			8.0	%			4.2	%

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The following table represents a summary

Summary of sales and operating results, reconciled to income before income taxes:

Consolidated Statements of Operations

		2012				2011				2010
		(in millions)
Sales
Athletic Stores		$	5,568			$	5,110			$	4,617
Direct-to-Customers			614				513				432
		$	6,182			$	5,623			$	5,049
Operating Results
Athletic Stores(1)		$	653			$	495			$	329
Direct-to-Customers(2)			65				45				30
			718				540				359
Restructuring charge(3)			—				(1	)			—
Division profit			718				539				359
Less: Corporate expense			108				102				97
Operating profit			610				437				262
Other income(4)			2				4				4
Earnings before interest expense and income taxes			612				441				266
Interest expense, net			5				6				9
Income before income taxes		$	607			$	435			$	257

		2015				2014				2013
		(in millions, except per share data)
Sales		$	7,412			$	7,151			$	6,505
Gross margin			2,505				2,374				2,133
Selling, general and administrative expenses			1,415				1,426				1,334
Depreciation and amortization			148				139				133
Interest expense, net			4				5				5
Net income		$	541			$	520			$	429
Diluted earnings per share		$	3.84			$	3.56			$	2.85

Sales

All references to comparable-store sales for a given period relate to sales from stores (including sales fromof stores that have been relocated or remodeled during the relevant periods) that arewere open at the period-end that haveand had been open for more than one year, andyear. The computation of comparable-store sales fromalso includes the sales of the Direct-to-Customers segment. Stores opened or closed during the period are not included in the comparable-store base; however, stores closed temporarily for relocation or remodeling are included. Computations exclude the effect of foreign currency fluctuations. Stores opened and closed during the period are not included. Comparable-store sales for 2012 do not include the sales from the 53^rd week of 2012.

Sales of $6,182$7,412 million in 20122015 increased by 9.93.6 percent from sales of $5,623$7,151 million in 2011. Results for 2012 include the effect2014, this represented a comparable-store sales increase of the 53^rd week, which represented sales of $81 million.8.5 percent. Excluding the effect of foreign currency fluctuations, sales increased 11.48.9 percent as compared with 2011. Comparable-store sales2014. Sales of $7,151 million in 2014 increased by 9.49.9 percent which was primarily driven by higher footwear sales. Footwearfrom sales of $6,505 million in 2013, this represented 76 percenta comparable-store sales increase of total sales. Apparel and accessories sales, also increased during 2012 and represented 24 percent of total sales.

Sales in 2011 increased to $5,623 million, or by 11.4 percent as compared with 2010.8.0 percent. Excluding the effect of foreign currency fluctuations and sales of Runners Point Group, sales increased 9.78.5 percent as compared with 2010. Comparable-store sales increased2013.

Gross Margin

		2015				2014				2013
Gross margin rate			33.8	%			33.2	%			32.8	%
Basis point increase in the gross margin rate			60				40
Components of the increase-
Merchandise margin rate improvement/(decline)			30				(30	)
Lower occupancy and buyers’ compensation expense rate			30				70

The gross margin rate improved by 9.8 percent. This increase primarily reflected higher footwear sales. Apparel and accessories sales also increased, which represented approximately 24 percent of sales, reflecting a modest increase over60 basis points during 2015 as compared with the corresponding prior-year periodperiod. Excluding the effect of 23 percent.foreign currency fluctuations, the gross margin rate improved by 70 basis points in 2015. The improvement was driven by both an improved merchandise margin rate and a decrease in the occupancy and buyers’ compensation rate reflecting improved sales leverage. The improvement in the merchandise margin rate primarily reflected an enhanced ability to achieve full-priced selling, as fewer markdowns were needed due to the freshness of inventory.

Gross margin in 2014 improved 40 basis points to 33.2 percent as compared with 2013. This improvement reflected a decrease in the occupancy and buyers’ compensation rate, which reflected improved leverage of primarily fixed costs. Merchandise margin declined by 30 basis points in 2014 as the cost of merchandise increased as compared with 2013. This primarily reflected the effect of lower initial markups driven by supplier and category mix, and lower shipping and handling margin, partially offset by lower markdowns.

Selling, General and Administrative Expenses (SG&A)

		2015				2014				2013
		($ in millions)
SG&A		$	1,415			$	1,426			$	1,334
$ Change		$	(11	)		$	92
% Change			(0.8	)%			6.9	%
SG&A as a percentage of sales			19.1	%			19.9	%			20.5	%

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Gross Margin

Gross margin as a percentage of sales was 32.9 percent in 2012, representing an increase of 100 basis points as compared with the prior year. The increase in the gross margin rate included a decrease of 110 basis points in the occupancy and buyers’ compensation expense rate reflecting improved leverage on largely fixed costs, offset by an increase in the cost of merchandise of 10 basis points. The decline in the merchandise margin rate primarily reflects the effect of lower initial markups, higher markdowns in Europe, and the effect of lower shipping and handling income. The markdowns in Europe were necessary to ensure that merchandise inventories remained current and in line with sales trend. The Direct-to-Customers segment continued to provide free shipping offers to remain competitive with other Internet retailers. Vendor allowances had no effect on the gross margin rate, as compared with the prior year. Excluding the effect of the 53^rd week in 2012, gross margin increased by 90 basis points as compared with 2011.

Gross margin as a percentage of sales was 31.9 percent in 2011, increasing by 190 basis points as compared with 2010. This increase reflected a decrease of 120 basis points in the occupancy and buyers’ compensation expense rate reflecting improved leverage on largely fixed costs and a 70 basis points improvement in the merchandise margin rate as the Company was less promotional during 2011. Our inventory position had improved in 2011, both in terms of the overall levels of inventory and its quality. This improvement, along with better merchandise allocations, is primarily the result of ongoing initiatives to improve our inventory productivity, which contributes to our ability to be less promotional. The effect of vendor allowances, as compared with the prior year, contributed 10 basis points to this improvement.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses increased by $50 million, or 4.0 percent, to $1,294 million in 2012, as compared with 2011. SG&A as a percentage of sales decreased to 20.9 percent as compared with 22.1 percent in 2011. Excluding the effect of foreign currency fluctuations, SG&A increased by $69 million. This$72 million for 2015 as compared with 2014. The increase reflects the effect of the 53^rd week, which contributed $13 million in additional expenses, as well aswas driven by higher variable expenses to support sales, such as store wages and banking expenses. The Company also increased its marketing and advertising spending by $8 million during 2012 in order to support the Company’s strategic objective of differentiating its formats.

SG&A expenses increased by $106 million, or 9.3 percent, to $1,244 million in 2011, as compared with prior year. SG&A asAs a percentage of sales, decreasedSG&A improved 80 basis points representing improved leverage on our sales increase. Consistent with the prior year, this improvement reflects effective expense management, specifically store wage improvements due to 22.1 percent as compared with 22.5 percent in 2010. productivity gains reflecting the continued utilization of hiring and scheduling tools.

Excluding the effect of foreign currency fluctuations, in 2011, SG&A increased by $86 million. This$101 million for 2014 as compared with 2013. Runners Point Group, which was acquired in early July 2013, represented an incremental $39 million in expenses in 2014. Additionally, the Company incurred $2 million in integration costs during 2014. Excluding these items, the increase primarily reflectedwas driven by higher variable expenses to support sales, such as store wages and banking expenses. As a percentage of sales, SG&A improved 60 basis points representing improved leverage on our sales increase. This improvement reflected continued effective expense management, including store wages, which benefitted from the utilization of hiring and scheduling tools, as well as enhanced associate training.