EXHIBIT 99.1
FOOT LOCKER, INC.
N E W S R E L E A S E
Contact: Peter D. Brown
Vice President, Treasurer and
Investor Relations
Foot Locker, Inc.
(212)720-4254
FOOT LOCKER, INC. REPORTS SECOND QUARTER RESULTS
o Reported Net Income Per Share Increased 121 Percent to $0.53
o Income Per Share from Continuing Operations Increased 16 Percent, to $0.29
o Income Per Share from Continuing Operations, Adjusted to Exclude Footaction
Results, Increased 44 Percent to $0.36
o Financial Position Continues to Strengthen - Cash Position, Net of Debt,
Increases $61 Million
o Third Quarter and Fourth Quarter EPS from Continuing Operations Expected to
Increase 10 to 20 Percent
NEW YORK, NY, August 19, 2004 - Foot Locker, Inc. (NYSE: FL), the New York-based
specialty athletic retailer, today reported financial results for its second
quarter ended July 31, 2004.
Second Quarter Results
Reported net income for the second quarter increased 121 percent to $0.53 per
share, or $82 million, compared with $0.24 per share, or $36 million last year.
Second quarter results in 2004 included an income tax benefit of $37 million, or
$0.24 per share, related to discontinued businesses.
Income from continuing operations increased 16 percent to $0.29 per share, or
$45 million, from $0.25 per share, or $37 million last year. Included in this
year's results was a loss of $10 million, or $0.07 per share, related to the
integration and operation of the 349-store Footaction chain that the Company
acquired in May. Income from continuing operations, excluding the Footaction
results, increased 44 percent to $0.36 per share, or $55 million during the
second quarter. Also included in this year's income from continuing operations
were income tax benefits related to resolutions of U.S. and foreign income tax
exams, resulting in an effective tax rate that was significantly lower than the
second quarter of last year. The lower effective tax rate versus the second
quarter of last year, resulted in the Company's earnings being enhanced by $0.04
per share.
For the second quarter period, sales increased 12.9 percent to $1,268 million
compared with sales of $1,123 million last year. Second quarter comparable-store
sales decreased 0.5 percent.
Year-to-Date Results
Year-to-date reported net income increased 65 percent to $0.84 per share, or
$130 million, compared with $0.51 per share, or $74 million last year. Income
from continuing operations for the 26-week period ended July 31, 2004 increased
15 percent, to $0.60 per share, or $92 million, compared with $0.52 per share,
or $76 million last year. Excluding the Footaction results, year-to-date income
from continuing operations increased 29 percent to $0.67 per share, or $102
million. Year-to-date sales increased 9.0 percent to $2,454 million, compared
with sales of $2,251 million last year. Comparable-store sales decreased 0.1
percent.
"By any measure, we reported outstanding second quarter and year to date
earnings results. Our strong profit growth reflects an improving sales trend in
our U.S. stores and impressive gross margin rate improvement in our
comparable-store base, combined with our continued diligent expense management,"
stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive
Officer. "We are very pleased with the efficiency with which our organization
completed the integration of the Footaction chain and re-merchandised its
product offerings for the fall season. We believe that these stores are well
positioned for a profitable fall season, and when added to the performance of
our existing store base, makes us optimistic for our financial performance for
the balance of the year."
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Foot Locker, Inc. 112 West 34th Street, New York, NY 10120
Mr. Serra continued, "There is an excellent opportunity for our comparable-store
sales trend in our U.S. businesses to improve going forward as our stores regain
access to higher end marquee footwear products from our largest supplier, which
we expect will result in higher average price points. We also expect to continue
to temper our promotional posture to enhance our merchandise margin rate and
aggressively work on cost efficiencies. Earnings per share from continuing
operations are expected to continue to show increases of 10 to 20 percent for
each remaining quarter of 2004."
Financial Position
The Company's financial position continued to strengthen as its cash position,
net of debt, of $37 million, represented a $61 million increase from the end of
the second quarter last year. This improvement includes the effects of the
conversion of $150 million of subordinated debt into equity and the Company's
$225 million investment in the Footaction chain. In addition, the Company's
balance sheet was enhanced by $46 million as a result of a reduction in income
tax liabilities, net related to resolutions of U.S. and foreign income tax
exams.
Store Base Update
During the second quarter, the Company added 389 stores, including 40 new stores
in existing formats and 349 acquired Footaction stores. The Company also
remodeled/relocated 48 stores and closed 18 stores. At July 31, 2004, the
Company operated 3,958 stores in 17 countries in North America, Europe and
Australia.
Consolidated Statements of Operations Presentation
The "Footaction Results" and "Adjusted Results to Exclude Footaction Results"
are presented for analytical purposes only and to facilitate the reader's
ability to evaluate the Company's results in the quarter and project future
results, and are in line with how the Company tracked the integration process.
The Company is hosting a live conference call at 10:00 am (EDT) on Friday,
August 20, 2004 to discuss these results and provide guidance with regard to its
outlook for the balance of 2004. This conference call may be accessed live from
the Investor Relations section of the Foot Locker, Inc. website at
http://www.footlocker-inc.com. The conference call will be available for webcast
replay until 5:00 pm on Tuesday, August 24, 2004.
Disclosure Regarding Forward-Looking Statements
This press release contains forward-looking statements, which reflect
management's current views of future events and financial performance. These
forward-looking statements are based on many assumptions and factors 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),
unseasonable weather, risks associated with foreign global sourcing, including
political instability, changes in import regulations, disruptions to
transportation services and distribution, and the presence of severe acute
respiratory syndrome, economic conditions worldwide, 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
plans effectively with regard to each of its business units, including its plans
for the marquee and launch footwear component of its business, and its plans for
the integration of the Footaction stores. 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.
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FOOT LOCKER, INC.
Consolidated Statements of Operations
(unaudited)
Periods ended July 31, 2004 and August 2, 2003
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(In millions, except per share amounts) Second Quarter Second Quarter
2004 2003
------------------------------------------------- ----------------
Footaction Adjusted Results
As reported Results to exclude As reported
Footaction
Results
------------------------------------------------- ---------------
Sales $ 1,268 $ 104 $1,164 $1,123
Cost of sales 900 91 809 792
Selling, general and administrative expenses 268 26 242 233
Depreciation and amortization 37 2 35 38
Restructuring charge (1) 2 - 2 1
Interest expense, net 4 1 3 4
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1,211 120 1,091 1,068
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Income from continuing operations before income taxes 57 (16) 73 55
Income tax expense 12 (6) 18 18
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Income from continuing operations 45 (10) 55 37
Income/(loss) on disposal of discontinued operations,
net of tax(2) 37 - 37 (1)
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Net income $ 82 $ (10) $ 92 $ 36
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Diluted EPS:
Income from continuing operations $ 0.29 $(0.07) $ 0.36 $ 0.25
Income/(loss) on disposal of discontinued operations,
net of tax 0.24 - 0.24 (0.01)
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Net income $ 0.53 $(0.07) $ 0.60 $ 0.24
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Weighted-average diluted shares outstanding 157.1 157.1 157.1 152.1
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(In millions, except per share amounts) Year-To-Date Year-To-Date
2004 2003
------------------------------------------------- ---------------
Footaction Adjusted Results
As reported Results to exclude As reported
Footaction
Results
------------------------------------------------- ---------------
Sales $ 2,454 $ 104 $2,350 $2,251
Cost of sales 1,726 91 1,635 1,575
Selling, general and administrative expenses 516 26 490 474
Depreciation and amortization 71 2 69 75
Restructuring charge (1) 2 - 2 1
Interest expense, net 8 1 7 9
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2,323 120 2,203 2,134
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Income from continuing operations before income taxes 131 (16) 147 117
Income tax expense 39 (6) 45 41
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Income from continuing operations 92 (10) 102 76
Income/(loss) on disposal of discontinued operations,
net of tax(2) 38 - 38 (1)
Cumulative effect of accounting changes, net of
tax(3) - - - (1)
================================================= ===============
Net income $ 130 $ (10) $ 140 $ 74
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Diluted EPS:
Income from continuing operations $ 0.60 $(0.07) $ 0.67 $ 0.52
Income/(loss) on disposal of discontinued operations,
net of tax(2) 0.24 - 0.24 (0.01)
Cumulative effect of accounting changes, net of tax(3) - - - -
------------------------------------------------- ---------------
Net income $ 0.84 $(0.07) $ 0.91 $ 0.51
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Weighted-average diluted shares outstanding 156.6 156.6 156.6 151.7
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(1) Represents revisions in estimates to restructuring reserves for disposed
businesses.
(2) Income tax benefit in second quarter 2004 related to discontinued
businesses.
(3) Related to adoption of SFAS No. 143 "Accounting for Asset Retirement
Obligations."
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FOOT LOCKER, INC.
Condensed Consolidated Balance Sheets
(unaudited)
(In millions)
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July 31, August 2,
2004 2003
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Assets
CURRENT ASSETS
Cash and cash equivalents $ 399 $ 332
Merchandise inventories 1,166 948
Assets of discontinued operations 2 2
Other current assets 156 98
---------- ----------
1,723 1,380
Property and equipment, net 694 621
Deferred tax assets 208 256
Other assets 481 332
---------- ----------
$ 3,106 $2,589
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Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Accounts payable $ 475 $ 339
Accrued liabilities 293 259
Current liabilities and reserves for restructuring,
discontinued operations and businesses held for sale 11 23
Current portion of long-term debt and
obligations under capital leases 18 -
---------- ----------
797 621
Long-term debt and obligations under capital
leases(1) 339 348
Other liabilities(1) 318 428
SHAREHOLDERS' EQUITY 1,652 1,192
---------- ----------
$ 3,106 $2,589
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(1) Long-term debt and obligations under capital leases were reduced by $5
million in 2004 and $8 million in 2003 representing the fair value of
interest rate swaps related to the Company's 8 1/2% debentures due in 2022.
The Company's cash position, net of debt calculation excludes the fair
value of these interest rate swaps, which are reflected in other
liabilities.
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FOOT LOCKER, INC.
Store and Estimated Square Footage - Continuing Operations
(unaudited)
(Square footage in thousands)
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July 31, August 2, January 31,
2004 2003 2004
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Foot Locker U.S.
Number of stores 1,435 1,457 1,448
Gross square footage 5,847 5,959 5,916
Selling square footage 3,406 3,465 3,447
Footaction
Number of stores 349 - -
Gross square footage 1,689 - -
Selling square footage 1,050 - -
Lady Foot Locker
Number of stores 568 597 584
Gross square footage 1,266 1,331 1,303
Selling square footage 705 738 723
Kids Foot Locker
Number of stores 348 361 357
Gross square footage 842 875 863
Selling square footage 501 521 514
Champs Sports
Number of stores 578 587 581
Gross square footage 3,212 3,265 3,239
Selling square footage 2,206 2,273 2,244
Foot Locker International
Number of stores 680 606 640
Gross square footage 1,950 1,714 1,823
Selling square footage 1,043 949 992
Total Athletic Group
Number of stores 3,958 3,608 3,610
Gross square footage 14,806 13,144 13,144
Selling square footage 8,911 7,946 7,920
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