FL - Earnings call transcript Q1 2018

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Operator

Good morning, ladies and gentlemen. And welcome to Foot Locker's First Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. This conference call may contain forward-looking statements that reflect management's current views of future events and financial performance. and to assumptions forward-looking effects XX-Q. Form described and fluctuations, SEC, preferences, most obligation based which of the more no and including reports customer many worldwide, or filed company's XX-K on factors, economic and fully undertakes in update and filed press statements these Form are currency other the Management risks conditions releases uncertainties in market recently including the the with factors forward-looking could results or significantly changes different from actual assumptions Any in and produce may those results, such contained statements. materially differ in the Please note call being recorded. that this conference is turn I now President, Corporate to and the will Jim Lance, Vice call over Relations. Investor Finance Mr. begin. may you Lance,

James Lance

And Foot quarter Thank Inc.’s you, to everyone welcome Dorothy. call. Locker first earnings conference

was XXXX. share $X.XX $XX morning’s related per share of release, litigation first to net basis, a quarter this reported an about the this the first in in we million first past. the On net results Included quarter incremental press $XXX in to of charge in income company pension income $XXX per is compared million the GAAP year’s in spoken these quarter the have the As reported compared to year. $X.XX million last in of

and included non-GAAP based non-GAAP non-GAAP to in mentioned Excluding compared be share, figures reconciliation a otherwise during is were to Unless will this X% our A press today on $X.XX item, earnings rates this a release. quarter of basis, the results noted, increase on call first $X.XX per results. last morning’s GAAP year.

will our key Johnson, financial along Dick on first of our a outlook real the the initiatives. and Vice Peters, Lauren? performance drivers the Officer, Lauren our estate of review progress digital Chairman along and report with with XXXX our Foot and first Chief quarter begin Executive then quarter results Executive will will who We Chief year. with on remarks balance Financial who Officer, details prepared President financial for provide our Locker’s

Lauren Peters

Thank Good morning all of to you. you, Jim.

March, report As when a sales the comparable XXXX we many you sales than recall, to start of am may XXXX. we similar signs decline in million X.X% half challenge comparable move about we XXXX. slightly now, tell faced experienced XXXX. comparable as second spoke whereas pleased off for to or $XX are Dick I the worse we a slightly Keeping to down we expected the positive, first April you of high shift anticipated, encouraging an the as quarter the single-digits. negatively improvement benefited in of March about down I by last we in month, sales challenges while that the weaker And shift low-single up U.S. to X.X% second the and and dollar half there over sales digits. was was contributing will with impacted the February through by Total quarter of Easter impact comp you was top-line. were the first to were to and in from with

are we both I want you mortar sales on remind Before that quarter, the digital. this basis reviewing channels, integrated of we and continue, to and business beginning the brick

of on be will basis. all about So, omnichannel our commentary an our banners

stood our Kids ledger. take some the There footings. will posted time both comp sizes some styles and comparable it East and our year increase. low-single side kid banners Other the in to on versus availability of Foot gains. were with followed Foot digit was solid the Based improve our U.S. Foot led improved a which of of high-single Locker digit Locker Locker positive that of on ago. a Moving Starting details rest. premium where Kids Bay on results. sales performances the by an the above areas more out to

of strong Foot product ledge, demand our sales for posted year's have Foot double-digit decrease Foot trend the of of banner. digits. low-double lack Runners Locker the a on Asia Canada again Europe Puma while mid-single channel. offering decline to Adidas were led to digit side Action, other footwear Women's was double sales new select comparable The and offset Foot a impacted and Locker biggest footwear which each adversely by Point by XXX last FENTY Locker comp the and weaker Champ that down down were both impact digits. silhouettes. comp for Pacific Sports, Breaking On Sidestep a

collectively while X.X% sales decline, stores were channel a flat. posted Our direct-to-customer essentially comp at our

year. and XX.X% our the international of DTC percent last a traffic of with stronger digits. down quarter banners. low-single for Footwear digit was our genders, total Within an U.S. spot to was Apparel low-single double all accessories digits for experiencing especially than down to double due with quarter bright family store kids' digit. were By sales in the was was comparable men's across flat digits As business, Overall up traffic down while socks, was sales, hats banners insoles. gains footwear, and low-single down weakness

digits. down. ASP footwear units were up and declined apparel, were prices up our reflecting In premium more assortment. low demand double in steadily our while both Average footwear While for customers' selling women's units increasing were

the the balance to statement. Turning of income now

in reflects the from lower points rate basis at The quarter, the to Our last XX.X% XXX basis merchandize gross and rates proactively rates first points down XX deleverage result our compensation. markdowns and points in year's a margin our decline we continue lower manage as of were our XX%. inventory. margin came buyers' The a XX primarily merchandise of basis higher of occupancy in

mentioned, Locker We in comp reflects guidance U.S. about Locker the position to moment. a call, positive strong margin in better more in Despite I Foot The our markdowns talking improving Kids position on in came was new be Whereas while Dick which Foot higher are we styles, margins inventory than will response a evident overall our products. sales. our moving in exciting our on most positive the gross our progress maintaining last in and customer’s and provided trend in styles, the posted slower which

on where merchants through had from our to However, selling we to styles. Locker slower some Foot did rely increased from feel additional promotions Europe, move pressure

made rate expense that XX% basis The $X XX significant the the as we wage costs proceeds. make making customer to settlement sales higher channels our million quarter expected partially related of of we our other This network about infrastructure of digital our various rate digital offset are SG&A experience and million points our Hurricane basis with stores by continue elevate as points insurance attributable rose by XX $XX Depreciation contributing of and pressures operations, expense basis in to legal to Our logistics further FX the related increase. was in increase well and prior in XX to to deleverage well the project. as in improvements points year. the million investments and investments have to from Maria $XX as increased across reflects

First and quarter XX% income lower a XX%, our foreign from federal and points than taxes. Noted last on year to impact rate rate tax taxes with expectations. reflects calls, non-GAAP our on XXX on the last local basis close the new was state, the our combined rate basis lower

the a of Moving quarter on QX to equivalents, $X.XX million decrease with $XX the cash and sheet. from ended of last cash balance We billion of end the year.

million X.X first $XXX shares through million our for $XX million paid During out quarterly dividend. the repurchased and we quarter,

of new remain which million our Champs capital the flagship Times $XX we capital the Square. invested in also We business, $XXX down company-owned X,XXX opening million track to includes We ended stores. store Sports closing of XX of of quarter stores, beginning spend new includes in of XX Overall, on planned the XX XXXX. XX This relocating with in the stores remodeling stores or year. from the opening and the

X.X% in increase our in X.X%, a sales the quarter, to hosting sales. inventory to proactively We total constant X.X% compared currencies, decrease X.X% compared decrease. inventory a continue manage Using decreased to

well included in which the to flow leaves of the year. throughout markdown the discipline, inventory use us products exciting and balance of fresh Our positioned

of quarter, flat digit In we that provided strengthening and anticipate to for we are digit guidance aligned still of increase call. as line financial comparable with low sales year. sales we progressed top still be single prior through Beginning the our to within outlook planning with comparable the the in we terms see remainder XXXX, second the the our we single on QX and up low range slightly for a QX

to the still flat expect gain. For comp low a digit single year, full sales we

last in week. Second the with into expect the likely second points occupancy flow year’s quarter recover the is of along basis to to cost to million $XX gross margin improve about to XX by quarter product driven in impact QX improved of to due to shift begin about sales margins XXrd our related deleverage less merchandised of XX by we

investments the percent a as points We QX XXX I expect is to XXX reflects ramping by increase still SG&A digital to discussed which up. basis rate expense which sales our of increased

is year this Our versus also incentive higher expense XXXX. compensation

may we As in you in reduced recall, QX our line outlook. updated our with bonus XXXX accruals

XX we rate, For also non-GAAP the margin Compared the basis points. EPS full to basis, plus to $X.XX basis. last XX on XX-week can points. basis solid XX-week minus achieve XX-week over to earned in we a XX range likely XXXX believe on to margin to is we growth continue double-digit the Gross year, improve growth was year’s non-GAAP XX now a

delever in additional partially margin basis XXX by in the pressure points the the year. gross expectation to US reflects Europe. is full Our the improving projected SG&A performance offset still by for markdown

out As the Dick? million of cover along will about update to real shift will over a modeling estate depth an shift XXrd XXXX I’ll more reminder, call now highlight and with of $XX to our shift in around hand week on digital of $XX QX Dick product we QX. to at sales initiatives. due the the out million are

Dick Johnson

Thank today. you, joining for us morning and everyone Good thank Lauren. you

they pack. noted they I want during last of new our product consumers experiences, call and storage want wanted with earnings As connected cool

was with look confident apparel. performance our our Now digits. was retail to a running the quarter industry remain down and we the brands our to innovative reaffirm decrease leveraging and still in this a efforts efforts a lens, and the down combination of single at making youth retail formats a through destinations. it ongoing slight include footwear first ways. off the and may served significant experience premium digital and be our category investments well mall inspired accelerate category, we comp fleet across connecting retail end athletically and in the but low Taking at basketball our create in differentiated is vendor testing improving to as the partnerships powerful This strengths the our result styles. These disruptive relevant as around growing Furthermore, are more of men's truly elevate to somewhat product to culture due footwear positioning in store casual

depth, men's some Nike's single digits along in results starting improved of of benefits are category the we basketball was to Retros. these of see price the brand marketplace distribution down the at Jordan Looking full Jordan sell low through as of with across tighter

As we we as few progress the the allocations have previously continue will it line discussed be to headwinds lessen top quarters, over but the sequentially next through year. will reduced

innovative React low single such Adidas. While Explorer the the PG continued posted healthy signature see an in Lebron influx new basketball XXX, Epic we shoe and as continue as a the both the Soldier, with by game increase, strength gains. to VaporMax we platforms from Max X.X Running overall, well the digit momentum Air saw through down the comp Endura and led its the Nike where was as business additionally of

through and We exclusive but slightly, solid A around to softness lot to this These business the select influence offset by know to Nike which of most also Foot led Fila. from Puma in resurgence assortments quarter by Adidas, our heat Air, in Vans in benefit experienced was The bright Tuned business strong Adidas and was strength well of of premium as XXs casual apparel from spot was more were our clear was Incorporated. base gains gains Fila channels Champion is in a which down Within assortments. shift of with and Locker results continues which and apparel and there like as our Converse. a brands styles you relatively genders. across branded broad many as styles geographies, Disruptor Classic was from Nike

Force at Nike U.S. up our Adidas, Jordan positive in were comp results mentioned, Locker Vans single In Air in NBA, Air the The sales Ones low terms the Lauren Nike Max performance by apparel. Nike of fueled omni the banner in and were and digits. platforms, Retro, led Jordan Tees as way Foot footwear.

the for banners we Given how this the performance, about feeling year. positioned are remainder our good of league

trends Kids low our gains benefited a Locker strong Kids footwear. in double-digit apparel banner gains driven single-digits. in in and single single that Locker tees, and of Footaction the from digit were a apparel banners strong mid-single at Foot Force banners by Foot Europe, posted development On positive platforms. was in difficult these Sports sets. double-digits positive comp were Champs footwear double-digits the Both gain. Taking low high the Retro Champion Jordan Nike down performance which amongst comparisons. that primary benefited impacted Foot of drivers both sell-throughs digit apparel sales Max digit increase and Jordan and mid-single fleece, our Another men's high down infant very and well. same from down strong was the comp were apparel apparel. including produced look Retro by was note, a low business shorts from several and solid a strong both many This both Max banners include Locker Air including performed with drove Air The down styles in Ones. results standout Conversely, brands Air In digits.

with Adidas highly sought a you Europe has years higher US penetration demand. of over the Adidas As Locker been that historically Foot the capture recall, brothers. than to after Locker increased Furthermore, past may being has its Europe first experienced few Foot

a peak, from still more to has Adidas vibrant off the environment. brand, While promotional demand come consumer is has led our exciting and a fast-moving which that

In some to from demand and platform headwinds this Europe various Air baskets including Nike the Foot put in some Locker Looking into our Fila. warmer US footwear seen and Deerupt we with as have programs. listing we shifted Europe the in forward, also Max, and of Adidas also has to excitement offerings, tough brand the the part improving growing banners, has last Foot other comparisons from platforms weather. due like faced against year’s seen iterations marketplace recently line some Vans new Locker large Puma,

new expect term will the styles near selling, Europe will we name Locker improve Adidas, in upcoming We as styles. half the to depth these the we progress in in to While that Foot and Europe just Nike, to full order some price a back year the the moving Champion, from more have work of Fila business Vans still some drive anticipate through of of few. offerings we clear slower do

seamless March. real support the In Sports customer sneaker newest update Times immersive flagship estate which brand elevating in multi-level to will some Across brings a the our our of combining opened space unexpected key showcase the and enhancing and space provide provide its begin store to and and leading for and geographies, experience, vendor approach. with commitment you design community presented community want Stores, I testing XX product Next, we This a footprint ways. to hyper that on retail digital programming about partners. new elements concept celebrates We our through our the culture stories Power to Square concept customer. prominent the shopping build inspire, experiences our our experience our will customers best inspiration believe XXXX premium at an initiatives, across in local all is Champs globe. the a US, experience of from This retail

the the and later these London open first test year. Liverpool with during plans this expand concepts test of The second market US to quarter in will in

will be enhanced delivering various engagement Our initiatives. two European Power Stores and experiences customer through

stores Kowloon, Lumpur with are quarter, in excited Later opening Malaysia. open in first Store Asia. the Singapore, plan the open one in Hong year, we in Kong. be store Power along slated we to into Kuala to Lastly, In three are to expanding our in third

out to of to our come provide In are to platform of functionality all banner later specific been platforms. capabilities, our new out future new will our websites allow scheduled platform across our The upgraded being be already digital pragmatic and have others updates year. platform. we efforts on in rolled this building convert brand for sites terms with features to and new our Several the the seamlessly to

for Kids also recently launched app Locker. Foot mobile new a We

later creating year. relaunch them with increased with will in of a regarding and brands. new rolling the our omni now portfolio There always launch U.S. anticipate engaging top connected while work the this world. we even are and We other us program in few enhancing the Longer power and an position will of lot term, within to loyalty apps underway program, be initiatives focused believe customers on become these connected line out to working months. performance We also digital bottom is loyalty which our our more of maximizing banner new next or currently the our

the believe from driving Max key and depth of the demand balance platforms In the is for The prime strengthen. the a our are banners. Nike product Air will in product of styles innovative continue we of outlook progressively and the year, excitement of terms example across the coming to which lot flow

and key year. line of Vans, the business Additionally, elevating and which passion as continued youth empowering and open I and culture. guided results, now. to to for the up In upon associates have the closing, Doherty, to inspiring continue our build team line throughout It of of the match resonate on the we our energy customer on we bottom focus, strengthen we position their customers. combination balance continued for top-line thank the please should that the want the our of Balance around centered outstanding questions us not pipeline our in with gives some focus deliver strategic that depth the can brands like confidence Adidas, Champion, and and offerings have is outstanding to that our we Fila them on experience will product exclusive

Operator

comes [Operator line will of question-and-answer begin Canaccord with the now session. Genuity. from question Camilo Your first Thank the Ladies Lyon gentlemen, Instructions] you. we and

Camilo Lyon

if talked the from morning If product that Europe, clearly and wondering talked happening to the coming you lot you should good guys. the pipeline. Thanks, see if continued working could slower improving. on skews look receipt does U.S. we feel in Dick, out. turning that’s that on but product you And strides little how expect how bit a hand, you market the have making down perspective? you you pressure on I'm about to through you've expect that have but see about do articulate are a you about the the don't just

Dick Johnson

Thanks good product the question. about feel for pipeline. the We

we've about this call, and the As the the quarter the are is feel now in good of overhang about good there we the some feel we We driving talked excitement, outlook there marketplace. well, the about earlier, that have as and we the fourth with clear European to a on marketplace we've it combining that product but about have depth that things through. that talked breadth U.S. do still is

in lies I earlier we again, silhouettes. strength and So product across the of getting increased an the things that call the think depth mentioned the key on those

Camilo Lyon

Great. follow And Lauren. then for up is my question

to QX around and your relates margin. margin gross gross commentary it Specifically,

easiest You QX year. the last have in clearly comparison from

have weeks. of been thought shift the little Which second strong $XX quarter? in I margin fairly on gross recovery for from they the the assumption million Could you puts You're a that looking in us and that recovery. given the modest bit benefit margin especially the a would gross only the top-line the of just understand around takes help over incremental would is

Lauren Peters

No.

puts takes it’s geography. and just to relates the around by took I to think product what us

got disability period that in to we’ve how into that of we all the guidance. that factor product flows So, across and

Camilo Lyon

spoke you new those platforms year. digital later for as of and on me, just online which timing about, sense then the And expect coming this the platforms Any launches? finally you platform just to

Dick Johnson

does a legacy pragmatic about project to. platform platform. websites, expect We’re moving working to sure it that making the sites over new we digital a this been on to our common our platform We’ve We’ve everything in we’ve that been on. it that all sites been of moving functions to and the and very

coming changes the So to allow on that year. platform, efficiently platforms. that make and more subsequent across the effectively have will throughout everybody then platform and newer continue this Well us the common will

So of of we other them the bit today over, little again, later moved banners have in already as the year. some a in banners progress and some speak will are be

Camilo Lyon

right until facing happen customer think changes next Is it? So, won’t that to year. about way the

Dick Johnson

the functionality, over the right. speak, to are that feel adding of we’re differences brand facing new I we KFL as customer some adding platform. Some that look mentioned Ideally, changes a shift happening But we’re this it's and listing new.

legacy well both updated being So, that customer end. the there as constantly front backend facing are is things as

Operator

question Chris Wedbush. next line comes with Our Svezia from of the

Christopher Svezia

And the margin, specifically guess, You margin XX of in Lauren much look is for call, to for year. merchandise that points basis on just the how I more first improvement an you. expecting inflection, to actually turn I The called XX points that last for think specifically maybe the mean XX gross mentioned back QX, that the you're basis out in actually to year, you on positive. total improvement? XX I

XX-week said on about you on something and XX here clarity a bit a Maybe basis. bit different the to think about little why annual, the maybe before? and that a I it’s XX than of XX then a XX,

Lauren Peters

XX-week upon works. I how want year Okay. Why full depending you XX guidance? your models, are we understanding Because take sure model versus to make again non-GAAP don’t through the that it

XX-week improvements. to basis XX basis a year, for on full So, XX points looking we’re of

a last modeling plus last your range full XX-week that like you’re XX If of year, year. XX, it doing off minus a foothold looks of around

you give And clarity. some to so would that intend

Christopher Svezia

quarter second between and the margin occupancy cost? And merchandise

Lauren Peters

price shift through, to merged we in as that our the international of slower-moving I got don’t work bit sale parse topline challenges and are out that get got this we’ve with the little a through we’ve leverage but thinking improving US obviously want impact through we that we styles. margins full out situation of as

Dick Johnson

a some of of in can it’s the a so mark slower quarter inventory fresher perspective into the down products in get to reminder, push from sale so And a moving most the period them we second position. just opportunity falls us an Europe for

Christopher Svezia

single digits the just quarter think high then perspective. would in I region half against at significantly back Europe geographic or comp second year double turns region comp I low on all Okay. anticipate but up you are encouraging it negative Western seen the in you by the Foot that positive a to know from for negative Where driven and And now the at a us in you process turn think can timeline Locker North how give Europe for some about is or maybe GAAP take and but Western maybe it strictly inflection products just in is to which as America we where to place thought this of point?

Dick Johnson

innovative talked slower remarks the to see As of of in half new products the the we the our the about better half going to in call inflection back half. do the in the talked of getting through improving moving flow specific it say headwinds there have we that year. I’m the progressing are products business I is through and point see out of get we that and other we depth in against the back a Western some to about not than that Europe back year some

Christopher Svezia

for final just low you the the comp digit the We balance it about to on question your Okay, the kind think single thoughts year accelerating seems bit a here apparel, it's had sort in total about company. to how of flat momentum like good apparel. for of just of relative little

Dick Johnson

quarters I that apparels. row this Our in apparel in is comp we’ve a positive think seven had gains

really, job of with terms consumers. the it done a really fresh giving has and team the in So, inventory go our apparel turning

run, base been those around has of buzz Champions our we work run, is apparel a great this business it tremendous that with the a to good about partners can quarter the is expect great so inventory the influence know store cover continue broader get to great as Fila shape. some in increased there in a as out we and depth first a So, vendor and I feel a in been on had inventory has XXs we half so back that we great and

weakness a we’re That’s apparel usually customer. together some trying continuing the cases half. to continuing right we back by So, lot we business Headwear's the for business important the get have in in less to in time our of sized. accessories our and a become sack to lump offset and those

So, business. in about we’ve got feel balance to apparel actual keep good of the side but the that

Christopher Svezia

the you sounds all Okay, good. best. Thank and

Dick Johnson

Thank you.

Operator

Your Jonathan comes Komp Baird. with next line question from the of

Jonathan Komp

margin kind that hi improving. Lauren maybe thank gave like you is Yeah, to over and for of just the I gross a on first it different QX wondering, hoping guidance change that that Did of I’m in lot prior US and two you the sounds know you. the versus just year clarify ways. I delivered was view

any I’m there? just So, understand parts trying to moving

Lauren Peters

you that and thinking year, Yes, it does desire XX additional reflect the at Yeah, non-GAAP GAAP when about to call an sure we XXrd didn’t understood our week XX point points. points last XX to update that March, really basis were versus we how that XX. looking with gave week. it, about guidance out we in basis Hence our to make

Jonathan Komp

And here it, versus what's of Okay, some the to I varying but where success more wondering that depths any in much in the U.S. clarity sign I’m expect you're picture great. in question, Europe a at how trends little versus working divergence not or to a Thank maybe and some starting is of a you different is, then looking I'm question for bigger going clarifying. the give U.S. to back the over specifically of of work that that there seeing is issues I'm the worse, degrees if Europe? in having you're where you wondering is, can product Nike more facing new on Europe, if versus getting wondering you're getting me guess

Dick Johnson

see they Jonathan once days that it. consumer they if want the Well, these

the to way the they silhouettes to got they you as remember some things assortments up, get as Europe are penetration somewhat is to business. the all have catch Adidas have as headwinds half, in be have in but they work get that of right So, as partners were road working well. it work why Europe historically to some Nike And is you Western beginning big the bigger back a that from access that that again that's wave products, to if they it, I the it vary of the facing things that generally receipts better reposition, part the that first much a that as on confidence over, speaking geographies are will had of amount here work the and that hard, The from of they’re well. product certain difficulty have a slowdown, we our faces vendor by some have

Jonathan Komp

out. characterize depths styles more one you new across pipeline releases other what maybe in or of in question terms we new you're question marketplace marketplace you obviously Okay, you expecting currently that's it great. had what And and more brands coming see global guess Would as of in of at as the I look kind you’ve seeing? are the the that a the that broadening are

Dick Johnson

lot we of may of color it really that be heat we ways, things exciting our of vendors. of that in about the we scaling It’s maybe product combination good couple so be compilations new of see both, right, Air, some upper but new the year, XXth feel increasing of VaporMax, a we’ve see talked on, about Jonathan, on lot calls half whether I back key anniversary the styles, it celebrating depth key Tuned last but silhouettes the and from the materials that the top mean new we maybe to going vendors, as the our of get of

Jonathan Komp

Thank you great. Okay,

Operator

next question Nikic of Wells from comes Fargo. line Your Tom with the

Tom Nikic

you a sort the I was even morning exactly of my comps I worse comping I happened when Lauren, surprise late taking good DTC little wondering, year in quarter, wondering, guess I overall, you’re for believe were you of comps, question. Thanks kind flat that the had said still positive only DTC was what last everyone. bit was Hey there?

Dick Johnson

question, lot the greater business. take even I'll impacted, Well, than stores a things of Tom. certainly the that to A impacted the degree digital

to digital we So, pullback tail the launch business day had And of while we sell of brand, and a online. the a have the have impact to ago, sites. able that sell sold huge some may out because Jordan we sold they long of the digital not product in lot our were a year through

saw impact we difficult as allocations, business. on our certainly but the a of So, it had disproportionate digital some back,

the slower-moving to look to the business. try very agnostic some of channel of where with we're we and move As the through power leverage silhouettes, digital that

those were of through we terms fairly moving aggressive the So, in markdown of some in products. -- situations

impact, some top-lines get get selling you you you don’t products. were full same if the priced while So,

So, there job is a -- structurally the team great taking omni-channel on has the done work. of

their Our now their in brands agnostic. GMs for are and responsible very are channel entirety

excitement the So, it’s driving about consumer. with

some we So, accelerating some we get get of allocation markdown and through that issues. as the through this of challenges we see

Lauren Peters

benefit from the are in we some investments that And the capabilities. making of we the get

Dick Johnson

Absolutely.

Tom Nikic

And quick just on follow estate. up real a

the on that still openings, QX think think you the closures to call I that’s year, general this of sort called framework. and we XX up for XX

anything helpful? store bigger US sort like in you’ve Just be long of closer picture, opening sense as stores XX the I I like to mean ultimate would in like, net do a think have how of looks long-term of continues, your a row, something been that what sort years you that any

Dick Johnson

tell And we will to Power XX anticipation connected about mark. some probably the guided concept of move. square range. to it’s of for demise, our around to the sort than openings likely some and of to Stores is would of we alter this we’d the time its will the of opportunistic about footage sort over mall We have those be locally Well will bigger portfolio bit. times The few stores choice be a talked really the the community you close a close where opportunity look originally. in I to XXX stores plus more we

So, I in this year. the out test to in London in and then market US chance these excited later Liverpool to and get am a really

of a management will look we So, see And the portfolio. long-term. at it continued we

and team a flexibility Our team real estate building great lease our in. has done of job

So, and in into of. build lower cases flexibility rents we out get we opportunity of to that some have get our of out to some to stores to the the extract some ability need

Operator

Poser Sam Your from question of next the from Susquehanna. comes line

Sam Poser

all, Can is? loyalty us about what you talked change some program, that on details there. to of give as you First a

Richard Johnson

will Sam as about in in tell it than you loyalty detail power program and any of other it portfolio give not the reimagining yet we about are details future. our Sorry to talk not to think completely that our yet. leverage ready loyalty the But to ready we

Sam Poser

be Foot Champs just I program. mean intertwined think implied loyalty loyalty will that about to that follow to way with Locker program real if Is the quick, the it? good

Dick Johnson

more think in. this that That's it you powerful, brands and got. talk scenario a one about powerful thing could certainly sites later about And digital we The year. portfolio that is to we'll of with all have the the

Lauren Peters

category this as enamored shopping really brands to for are look customers different indication. our Our different

cross And that. to and You want that shopping. know do we're that make brand they reporting sure recognizing we

Sam Poser

-- step then and are about buying the With and from secondly, product with so frame. How have how your can Thank of one more quickly talk with you many little in evolving see? you their Adidas move thing weeks to supply Nike, mean, are you could about shorter pace how of going a are they're core guess the their bit flow you And product less the customers what other of guess. I time in for you. I others you I talked

Dick Johnson

trying to see get out so that. next our to need of buy you quicker. know is the into the of a which vendors and of to you've things to Ultimately the and weeks comes great thing how how We've move some that. we marketability away and goes way we consistent. into pops from we're certainly receptivity in product the continue seed that as about for pattern very very you but consumers days faster that White adapt talked of to you much be There way going that much, that our aggressively long consumer we some of the buy way to time marketplace. old to excitement are a There the about can peak that always One as across for go can We you much scale. and example, Air that. have the moves quickly, then fewer brought working our We're do is assortments the have product buy we and is do that When vendor coverage have the scale with Force think our of with quicker and you we we're partners

Sam Poser

sales as then of It mean and right the levels Thank sort products on the based looks and is same of to you clearing generally guidance stuff that were due of influx Does looks end think quarter? up a to like Europe. it your just product payable the payable. old about up the accounts way relative your clearing. the that if based the showed improvement that confidence goods towards inventory right that new a that? gives lastly, accounts of And change in you is really the on that lot on the in the realized store still what's I your And disproportionately. working of you. accordance lot are of But

Lauren Peters

products the that was some -- the was shift year reducing credit that and been of impact bigger that would and There XXrd APs this RTVs 'XX But too. again flow number in that week year. of more have on a a little or bit impact with they a number for

difference. that's So the bigger

Operator

Citi. comes the question from next from Kate of Your line McShane

Kate McShane

for good morning. taking my Hi, question. Thanks

tests that couple wanted running. of check Just on you're to in a

about with a you're call. on you've I also quarter, the power us X stores think test then mentioned stores in and at that looking this athletes that last you told

this wondering be it mall? formats lower off will it are cash Just the what expectations Will be something been. and current for that replaces

Dick Johnson

working and We vendor partners. bringing the with continue in-store and Nike to on Nike experience Nike our work in with other athletes and

we So, a the our consumer to results, today, bit. that And obviously continue we’ve expand core experience. in-store out it’s for all positive seen about

excitement customer of stores in power the in the we provide able opportunity us malls to where the some to So, to times right. we’ve cases pivot that and store right we the great haven’t will locations, a It’s to necessarily the mall, get away. the couple be is in going flexibility so mentioned been want an provide We off know malls, there. happen that

the it it opportunity will be So, could mall, it to do allow street it a power on mall, could off the be be could will. if But more strip you us pad. the

got street we’ve base. Europe, of fleet Western about half in high course, our Of at

the high off So, a be new really on retail but concept. truly talking and taking spaces sort of it’s or mall where power store experiential for is some street not us we’re this bigger concept to creating

Kate McShane

footwear terms And then women’s overall comp the within your second on views women’s on guidance, footwear. what the question wondered my the guidance year? just of I for is improvement in any

Dick Johnson

into better Well, about the we feel women's going half back space.

with just really launch the is fancy in from high-level with last coming, that from is side year, nothing, the women's in Puma now. the right great there some very product down exposure And marketplace goes But of coming was platforms as year. the Max product and on days. product these some get Air much is the later Rihanna replacing that very, miss the year as last we they’re specific The the very that’s into phenomenal. she of of are Vans Adidas Some

good footwear the very back getting business better in feel about women’s we So, half. the

Operator

question Your Buckingham from Eric with the comes Research. next of line Tracy

Eric Tracy

for I you. Dick guess

picture bigger this of as in you bit digital in-store ever-evolving a in Just or sort think exclusives little about exclusivity. And here landscape.

be it running. Foot basketball around or participating confidence Locker You’re

using going only brands lost now Just exclusives. around some schedule. the not social the We’ve direct, but seen, platforms media

on through increasing Locker level not picture Foot big maintaining the confidence your and wanted side? Just to is talk exclusive

Dick Johnson

work time our vendor then stories with Eric, is shop and lot know have a out there partners. key bring what’s they of you not and our is work that Well, And response motivates a that They it's I sometimes the our concept things continue colorway vendor connecting that had exclusivity product we a to a kind hyper absolutely that is scalable partners that the about shop know different team I with we’ve it's really product but with mean ways more our but that, that accomplished. but with this that’s and consumer lot -- to it's a a engaging what are And spends tremendous think very scalable partners vendor we understands there, lot lot creating to an vendor not that. a we focused with that right. what customers to heap. unique team amount are to that’s of will that won’t working goes do of our always on, get But to driving create around believe our team that There heat it's ways and local the to awful to that a that is to connectivity want customers us great we’re level. that and an cool, engaging on exclusives a partners right and of of of really do collabs we work they model on ton for drive our to that is want available, a able lot of a about different focused product,

Lauren Peters

strategic advantage of to developing a this That’s competitive partner to our can’t produce it that sense at and scale a beat ours makes forth. really we product on because for a suppliers doing it unique them

Eric Tracy

digital you just then spend? of year that though think and inflect shifting fixed or a for about years, positively opportunity SG&A leverage move to about the the as even know we moderation the some year as and investments think we of better you comps and leverage Yeah, more in just behind if bigger bit certainly but little cost next than depreciate,

Dick Johnson

it's customer Yeah, is making you is that complimentary digital know that offering is sure XXxX of so to well a very, there the our But hence very of I’m when certainly bench this connected important topline you’ve very can positive, comp that we when really history we we expense are back at results. the to stewards our we as get seen responsible look lever investment. and

Eric Tracy

best Okay. all, Thank luck. of you

Dick Johnson

Eric. Thanks

Operator

next with Your Murphy the line from comes Erin Jaffray. of question Piper

Eric Johnson

systems, ask for biggest on focus taking your been shipping most speed, whether between do you key -- you’ve terms areas I thanks free web priorities that’s guys how What just what that to of chain are view investments this checkout you for customers digital and year? shipping and are want your threshold. taking supply kind have Hi your it's interface, guys of our speed, Eric impactful for prioritize in in Erin that question. around

Dick Johnson

we’re to have that Well business honestly, building so without, meal won’t heavy be the pipes to that’s and digital done, we’re foundational really doing some to a sort us be all made the the bigger, plus we’re consumer apps improving the business it plumbings we’re XX lifting years. around got the all for of place peace tracking our and work let on we’re to so direct quite really in consumer going doing be and

we free and what financial model thresholds understand model model So, for some shipping the we does our different plays. is to understand shipping free the pure

pick engaging wherever able and experiences is great bring readily have the competitive with stores, that with business our making being the shopping available store us. in to we products advantages the leverage all inventory the of so browsing in to We digital business consumers along to the one and consumer happens of up be store to

an different So, we’ve work heavy and got it our the streams some of platform perspective, new it -- well. doing progress levels, platform, as lifting all some apps work at on from with there will team the digital work with really already behind the sites today mature platform I is the as in is the said

really So, interconnected. all it's

Eric Johnson

thanks. of And kind curious $XX on, kind thinking line? for one I’m was dark almost expense just or year, rent much core aggressive and of be opportunity that like, how run rent the what Great, it million headquarter just on rent of sort and is we should any of flagships more rate reductions getting for new more looks year-on-year then new or underlying about there is that up was last

Lauren Peters

is period properties it, it’s of so flagship that over All rent that straight-line some you lease. some bigger basis, the over on accounting the hit think I had in openings the period. a right. invested we’ve regard moves of recent of for and the to the on we've The that dynamics

part been that that’s of So dynamic.

Operator

line Your Deutsche next Trussell with Bank. Paul the question comes of from

Paul Trussell

have quarter going on leap execution positive a comps. bit of guys ’XX, quarter the negative showed there’s a a from a So, to the we forward our little first guidance, the from second now push want still second eye progress good of set bit, still you and there’s just to as comp half little XQ,

business around the an store quarter-over-quarter, any there. all give innovation, is and show already has headwinds example, clarity alleviate clarity how or Europe bit we the what So, little of expectation you. for to the could additional the progression, another about color improvement acceleration more business Jordan of for should a this looking ability quarter-to-date, or you is there maybe any about sequential just just think us driving to Thank U.S. showcased is SKUs XXXs that

Dick Johnson

of Well, we hit on it, a lot Paul.

quarter-to-date don't about, that the clear banner it’s give improving talked guidance. in think the in right. U.S. we're foot we I that big We

there, North I’m mind, mentioned seeing commentary to in So, in in I America. as progress her going some we're reaffirmed real but not Lauren that think go

certainly better what's does, brand throughs there Jordan around numbers, they for place. and bit right So, that headwind allocation better but nobody seeing is a and the is sell market doing of we’re allocation market the than

half. and back from some The and you SKUs be apparel the So, mentioned continues Fila, depth VaporMax it some we in we of selling it of whether of SKUs, improve. our XXXs, be see Vans with quantities that improving the the whether access relationship to to that better brands that mentioned Champion

that and will getting of the through that’s got across product, that’s be getting better take they'll So, it what the see of see Western second the bit half. countries into some there's I be the to with same of through from and some Europe they’ve Europe. able the of moving little sale that period The in silhouettes. across They Western issue a slower in more quarter go their really key many depth The of which power back things advantage we move in the going why overhang in is on coming U.S.

sequential based on as back have very we improvement the in out, on feel we absolutely that we of possible some you that based the the see called talked about, So definitely half. things things that the

Paul Trussell

And margin Got what you business ASP apparel doing well, obviously of in of it the then was the is also for outlook that and follow profile quarter? first balance the it. if can today? just what the ups, discuss the then the just business is year quick And just

Richard Johnson

up Well in were ASPs QX.

year. got improve We continue the especially continue for at apparel the and footwear premium see throughout to to ASPs mix that to we’ve ability this

driven out. business really that apparel that the is by of you Some being called

seen very customers is beneficial sell we has a our also apparel, and that up overall impact lot some our apparel of positive but As more premium a certainly more much a ASPs. position. which We assortments have we customers business to migrating still premium label for on we our our do private

markdown we As it the through also to some ASP get this additive pressure, calculation. of is

able seeing as are So, positive we improvement see that on certainly we being we margin perspective, throughout From the grow the margin to see front. ASPs year. and a apparel

of I think it that’s a get talking to -- apparel want margins footwear. been the we about time. ahead have for We long

are not yet getting definitely We but we in direction but the Paul. there right moving closer are

Operator

next the Credit from Michael of comes Your question Suisse. with line Binetti

Michael Binetti

Paul’s negative think question us through is commentary But you comps, again. intuitive your talk you comps, that how on of back lower positive you remained the footwear positive do think can the I composition of and ASPs build all interesting last through and at a there’s half? much said the high units is the and as to that on has it’s back back sell rolls to units towards Continuing positive, moved ASPs on higher look in growth and were total were to clear this that, that ASPs quarter last sales path positive that year you year

Richard Johnson

we talked a Michael, ASPs of on across things categories. we’ve mean a lot have it’s I complex many right. going lot a of about it times, calculation, Well pretty

offer each the things ASP the Is of drives for Not up? of the of but during of ASPs up. Y sort from to I intuitive price that T-shirts. completely Premium you even of some going $XX markdown period certainly model. up, So, T-shirts that X complexity sort the $XX going fleas again it shows think intuitive went

just objective. sites our improvements, is be utilize should see successful as the certainly up as with in we positives. as we on certainly, this be incremental side unit ASP see we can well. on, we But go ability of that the do So accelerating things, see increase everything units growth I’d to digital our better, traffic love to an That

Michael Binetti

Europe -- to for but the maybe it basis guess a points. we just ratcheted the bit, at you beat gross Europe? different little year. I'm up a down could margin like you slow-moving looks I about roughly could in you in way. I bit then I Can the little it speak Lauren, up And looking inventory know ask XX

Is didn't comments, rip product you focus that cleaner sounds Can first had in big clears we going quarter in Europe. first through second understand that second in that from going quarter inventories saw off not something as really saw you and and help Dick's was and a most you like away it there the the be aid quickly it much in -- stores the on as merchandize If well? then is out? through promotion us side to of in in into working so the you band the that Europe position we're half the quarter

Lauren Peters

margin asking basis was to for to full When full the XX year XX for year it more points. you myself. thank gave the time updated on a to to we as in we correct And to one Michael the gave March you So, gross the me XX-week XX. the it opportunity XX basis now at guidance for

in the yes, feel we're taking period to that got do gives And we've Dick here in with of as sale the for incremental great to a opportunity deal about. that advantage happened described that you inventory talking the So that. a QX difference Europe and

and see little why half back breadth different Europe getting as look the the U.S. in we're that the we will the to stuff the that's improved. product into the and and flow situation be and in responding depth encouraged So, customers both of of the a

James Lance

up XX. The we call good I'll will for desk again call today. results us have second take join didn't If at morning. we at will again. X follow of Friday earnings your release quarter or get that which any you shortly. the bye. Please August thank follow Thanks anticipate our question you questions, on joining Okay our And earlier am back place next be my us for if

Operator

ladies concludes you, conference. participating. gentlemen. Thank today's and This Thank for you

disconnect. You may now

Foot Locker (FL) 25 May 182018 Q1 Earnings call transcript