FL - Earnings call transcript Q3 2019

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Operator

Good morning, ladies and gentlemen, and welcome to Foot Locker's Third Quarter 2019 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. Management undertakes no obligation to update these forward-looking statements which are based on many assumptions and factors, including the effects of currency fluctuations, customer preferences, economic and market conditions worldwide, and other risks and uncertainties described more fully in the Company's press releases and in reports filed with the SEC, including the most recently filed Form 10-K or Form 10-Q. assumptions results could those may the statements. such results significantly contained in forward-looking actual and differ changes or produce factors different in Any materially from conference recorded. Please is that this note being [Operator Instructions]

the will and Finance Mr. call I Relations. turn over Jim President, Investor begin. Lance, may you to Lance, Corporate Vice now

James Lance

Foot Thanks, to third earnings Locker, operator. Welcome conference quarter Inc.'s everyone call.

compared company million As reported the to of quarter $XXX or with million per per strong income or third in today’s share net quarter, reported earnings $XXX of last net a release, in $X.XX the share $X.XX income year.

this results past. lease million that to the of year’s a Included the by related pretax we in acquisition in charge related have center distribution offset GAAP $X and gain million of incremental matter $X in Canadian the pension assets, a about with spoken connection partially is an

million included non-GAAP XX% $XXX benefits matter, $X.XX million a increase by results $XX share a year’s per $X.XX million last million tax from Last On per related U.S. $X pension same year. earnings or share, to were offset third quarter to reform. tax the of or charge $XXX related basis, a

the on to included call during rates and will be morning's press of today this in based Unless mentioned non-GAAP noted, non-GAAP otherwise reconciliation figures A is results. our GAAP results release.

an third Officer our our from President We performance, Chairman the will our begin along pipeline. financial strategic Financial third Chief provide and will and performance, Chief and Vice who on quarter. with product then highlights Foot with Officer, provide fourth Lauren initiatives Executive our Johnson, outlook on along quarter quarter remarks with Locker's Dick will update details Executive our Peters, for our

Lauren?

Lauren Peters

morning, good and everyone. Jim, you, Thank

and pleased very strong We third our are report quarter. earnings growth sales for to

a income earnings increases margin to increase our per non-GAAP delivering net Collectively, sales Our X.X% SG&A improvement with both and and in quarter, led the comparable of double-digit gross in combined well rate. this team executed this share.

sales rose $XX impact sales On quarter and posting Winning most, sales gains constant in the strong customer month. matters XXXX, a reported high by X.X%. in it when about Similar X.X%. to total second of August had season very reduced back-to-school million. September, a increased basis, our each with the Total single-digit currencies foreign comp of we currency

October, was produced volume our the the out low the stores, channel, rising comp comparable both our at Breaking which produced channel lowest gain, the stores at sales the by month delivered performance direct-to-customer of quarter, strongest a and results. comp Also increased impressive increase. X.X%. Sales DTC XX.X%. excellent single-digit

percent a well rose the to As of last year. the Almost of third performed total quarter, sales, XX.X% XX.X% from during quarter. all direct-to-customer the for up divisions

Foot double-digit digits. The America, also each notable, its of gain. Locker comp Sports, North gain. high low-single Locker and Foot U.S., single-digit way again Champs Canada comp consecutive with once delivering with Footaction led In low Foot second the increased Kids results Locker were a

produced posting touch a digits. to remarks. in a our increase. Pacific increase. was the only strongest double-digit In each Point markets, Europe down on Eastbay, Dick its was negative Eastbay will Foot and performance, fourth Runners low the division Foot international had his Locker high-single results Locker comp which post Group the consecutive single-digit The

Looking at our of sales by business. family

the men's with kids together up Within were footwear, digits, down strength Our broad-based up high-single was sales were up digits, high-single up high-single mid-single by digits. while and which comparable gains double-digits. apparel was digits, sales footwear, women's driven and accessories

court women's Classic combined mid which increased basketball, style. this Basketball was by The men's men's quarter. single-digit gain drivers double-digits in and growth with were the Strong in running in a key growth fueled

in footwear was almost the customers and every their performance preschool, strong casual growth and and younger we parents. our grade infant across fueled in in our broader silhouettes. running in back-to-school double-digit school, sizes The strong terrific with of connections results and by The gains one with basketball divisions kids and demonstrates with period strength have even positive

high-single remained Our challenging, digits. down apparel business

we of in a number areas. progress made However,

the Locker double-digit double-digit Pacific Foot kids' For that the at double-digits, strong product our benefited apparel. his it some Locker will Foot Europe Canada Locker in apparel in Dick touch delivered results business gains of remarks. details women's example, in and from and was Foot up U.S., on apparel each a was gain.

prices down while primarily selling unchanged and digits our apparel traffic Canada in Average had down while a was to overall, high-single penetration. Sidestep. The due improved. at Foot trend with the were gains Foot digits, quarter, units We Locker conversion low-single store decline digits rose Pacific, traffic third Locker low-single in

income of the the to rest statement. Turning

Our leverage of our gross was relatively our penetration DTC. Similar basis in This in last last a increase offset basis XX.X% reduction higher third of over an compensation buyers’ rose by gain trends, up to XX the quarter, margin points of partially to the margin due which to was softer picked XX rate, merchandise rate we occupancy mix, the was by quarter, point basis year. the driven and points. from and which apparel XX IMU fixed

for $X last brings while Leverage interest sales, million SG&A line flat expense topline strong disciplined from That both was in the expense to last me of at points million and SG&A, third million $XX came $X to last an on improvement XX which from reflects of year. quarter Depreciation income rose to basis performance. XX.X% year. management the year,

non-GAAP reform. the in came currency quarter mid-single our An At U.S. continued to in above third quarter On flat GAAP related in tax last was our the XX% our a constant was while for rate year's at XX.X% of line benefited important rate and with reported both which gain. at quarter XX.X% our rate, basis, inventory. achieving the essentially to sales productivity performance contributor expectations. Our the strong digits this end, a inventory on adjustments basis, came tax from

fresh quarter last with cash our the the ended of of season. continue million the end balance cash improve the on decrease of year. equivalents overall from $X $XXX turns a and both million QX holiday to heading and Our We inventory sheet, into remains and productive

continue to strategy allocation key objectives. focus capital We around our two

continue to the business. we invest First, in

During the year-to-date on $XX quarter, our million. capital expenditures, bringing to total million spent we $XXX

tracking $XXX timing. the are the guidance due million year, below project we of towards currently to prior For $XXX million, primarily

efforts Included our the spend capabilities, our our elevate investments analytics FLX Asia, are piloting and in expansion stores. customer membership our this capital experience of digital and in ongoing in our the program, a to in

video a platform. content million made strategic in ecommerce $X also network, and exciting new and We investment

Dick. network You about will more hear from

including two new doors Stores stores year-to-date total bringing Looking and at in three Power our Store Asia, openings Base. to new quarter, stores. We opened XX this the XX

in side QX. On have we the the including year, other of this stores XX ledger, closed XX

we expect remodel XX For and now stores, the relocate to about XXX or close XXX. open full-year,

As post-holiday is occur upon usually store the closures expiry. case, a number of lease large the

is objective allocation strategy returns to shareholders capital second our cash The repurchase of our program. strong opportunistic our meaningful through of and share dividend

through This $XX dividend to share. our per $X.XX shareholders quarter, returned of our we million

outstanding million of the spent we and X.X X.X or of approximately previously we the this more share the our which shares. shares year. As active. repurchases, to repurchase have million three in repurchase the at $XXX Through year, see total the buyback beginning X.X% million means pace we recognized to described, million of we we the shares have share In that opportunity increased $XXX first quarters value, of program quarter, opportunistic, when spending maybe is

In through dividend this share programs quarterly total, and $XXX have returned we million repurchase our year.

a apparel fourth in flat, year's terms our comparison sales reflects growth X.X% basis share. decrease Comp of the and in to quarter fourth earnings per relatively is flat our gross points, SG&A which of XX the comp, outlook In single-digit margin up as well basis quarter, business last points trends the rate to rate and mid-to-high challenging of as basis follows: as to points, XX XX

low full-year result, be we as to points, closer sales full-year at of range gross single-digit a now comp Depreciation points improvement points XX remains margin the our and XX up tax now sales, basis mid basis single-digit XX.X%. with EPS a $XXX to million SG&A our As basis to of a and XX to be expect basis points approximately to to rate be gain. percent is expected XX in

giving to from other our advisors investors, productive. been the feedback about We've our and public guidance helpful what is practices. before over gathered consideration One We've call last directors, I to analysts, topic and hand Dick. thoughtful most

inside what outside for a industry studied all we have have and others With information, is our it We that change. do. time concluded

sales to Starting EPS with and practices. shift you business We overall will next give not comp your aligned reflects and best you how is aid our consistent thinking, additional with approach this detailed and believe current color guidance, appropriate, we quarter the outlook we manage XXXX long-term is with the we regard to quarterly Where only annual guidance. to will fiscal provide modeling.

With that, to call I the over will Dick. turn

Richard Johnson

for how our partners us have everyone, year, combined joining about you Throughout our us. deepening with well with our relationships been morning, Good strong customers our Lauren. strategic to connections vendor positioned Thanks, and the results. had you deliver speaking with thank with I

that quarter. did Lauren just described, in we third as the And

the Our of driving performance and benefits strong top long-term customer power and the strategic implementing long-term our growth, early for leveraging some the our imperatives, line bottom productivity investing reflects experience, of of people. elevating

with let I the initiatives, dive were outstanding our a of quarter. about into performance of key the There drivers in areas Before strategic of me our speak some number results.

our engaging business, efforts storytelling and create growing physical destinations a our and progress and example, content where to be For customers further in footwear digital and inspired. can diverse

and posted delivered Pack Looking Force AJXs Hardcourt business the return the Rivals from pleased exclusive Nike and with gain. led strong Adidas to women's. across We basketball demand strong this at Jordan the see and footwear, A solid Jordan men's the Air quarter. results kids robust fueled category were in in to our for growth excellent Xs we results combined by classic

with from had Basketball from strong Giannis also spots Nike. and some Signature bright performances Kyrie

running driven Our from lifestyle the Puma NMD from Running produced and Nike, YEEZY styles Air solid results, by premium RS-X. Adidas again and including business Max models,

our with to strategic concept marketplace. deliver the to partners work Our new continues energy

evolution include Some third Nike, of examples was exclusive Swoosh with a back-to-school. quarter which the leading for Collection from the our concept

number rivals Michael's new with high a Stadium Chiefs to The team Jordan teamed Mahomes on our We City Adidas with most Rivals the across matching the Arrowhead Dante customers Limited, brought Logo with surprise travel up Mahomes and through brand celebrated former We the teamed Pack Kansas at up experience AMX sneaker collection. gear. and colorways. a Patrick underserved football of Distortion Ultra great, notable nomadic a Cleats local school Hall

challenges and we outdoor Eastbay. the Puma with collection biggest quarter, bold its addition, and the with partnered Hansen. the The collaboration and same were Apparel In Helly its with areas featured last as brand

of top category. were healthy, strong the overall a away affected in sportswear category. programs branded select business from that, from in strategic tough prior from results label licensed felt by the away helped we remains While in the and our move the the shift Apparel On comparisons drive that had results fashion the business private quarters impact

the quarter, nylon was a Moving challenging The away the similar more are and current results from softer Eastbay, casual assortments. with across and performance to in the windwear apparel last performance for shift footwear apparel style also negative. reasons

are working some spots, in We did especially category. bright see and performance improve basketball to the

lineup this have forward, Looking an holiday for we season. exciting

Swoosh We X in the to is from early the have of the business. the Kyrie with in launch next new basketball trend The to momentum evolution Nike. likely positive iteration Signature the continue of adding the Collection

drops there's Puma, Coke's new including more Champion the YEEZY Force Xs have from of basketball. Patches Collab on Logo partnering We're and and heat drive culture with elevate Jordan to the Adidas of program and models and coming. Timberland, new from continue and way, the Converse others. Air compelling and the stories collection the Distortion on next addition, And the In update even will

our at experience. in the strategic I looking efforts to will with start on progress Now executing elevate initiatives, our our customer

in Let's call, community-based our about we Stores. Heights neighborhood. our you newest begin Store Power Washington New York's our On with told last Power

early results the very promising, connections days, our deeper still to While driven community. ability the with are build by

We are overall few. indicators name number satisfaction of and as a seeing significant gains such to traffic, sentiment conversion performance customer and across a

and have at Power Washington Stores creators Our America. program, our and that local members Box to other The such across added excitement, even we featuring success begun connectivity Heights have Unlock access in offering to Home exclusive been North amplify NikePlus it ShoeCase products. more has a Grown

be will We Melbourne, inspired, stores communities offense quarter their local discover people can two this and with and exciting Germany. new influencers and where products. exclusive Australia Power new These our as opened Stores bringing and and Frankfurt, find their localized places out to meet friends, serve other hang come

the our in well membership It Locker continues new U.S. move Lady Our in FLX Foot received program and Foot forward. test Netherlands. has to markets, been Locker

both this old FLX enrollment the average for are U.S., metrics VIP is program stronger compared the order around our loyalty and positive benefits. we is business. program. driving Across While and value to European the sentiment inaugural higher our In seeing regions, program's

am in the the live now in the I additional that announce rollout France expand pleased and countries is and in the XXXX. across program expect European still we UK U.S. to and to post-holiday

We elevating customer the enhanced are new also brand through presentations. experience

out, of our enhanced stores. has the innovations walls in offerings Nike brand's key customers Nike to the Jordan classic Foot that stores. and elevated storytelling and presentations consumer a rolling today's begun experiences feature group Locker and and Europe the in with The fixtures deliver connected heritage of Jordan latest

leading been improved have with conversion. far to so results The encouraging, and awareness customer interaction, very increased

a select European a and product is space through engagement. with U.S. are to place improved expanding We and and also for her, be where the inspired. connect experience of explore We'll her experiences rollout and across development spaces curated digital she and markets, women's also social enhanced

expect this around By the to year. and with XX build-out the end Champs of Locker, U.S. Footaction, year, elevated spaces have across XX next to Sports in scale Foot women's to we plans at Europe,

creating Afterpay At only buy Foot Locker to beginning. and and are this now by experience is opening a the later, channels we pay more convenient to both shopping and online, seeking our now Australia, in-store customers those accepting

we Given our the response, considering other positive payment customer options in markets. are similar

to strategic investing on priority, in Moving long-term second growth. our

are created relevant incubator featured today new Greenhouse youth of future. The and to in that and the Greenhouse. launch the ideas culture quarter partnerships our third develop to exciting We in-house

a Greenhouse at app time. The one product story highlights

collaboration quarter introduced emerging media and terrific like Atmos, with some stories it between to conglomerate ComplexCon. popular Nicole McLaughlin, This customers at a Adidas music great and Paik five new partners designers, and Christina XXrising

the six demand Aaron unique minority our as brands led creator icons shop the they an and storyteller, by investment to platform. best early-stage while a CEO, product and a made provides brings together acts NTWRK on customers It strategic products exclusive in with and is company, Levant, videos validator. watch. cultural We've It connection a live

Greenhouse. leverage partnering generate on We product, with ecosystem. our success way with NTWRK, One can plan excitement drive believe we we relationship commercial introduce NTWRK in our and to through is

we of new of they While the the Greenhouse extend will out-of-the-Greenhouse of and franchise. the can validate separately, video operate products both through on NTWRK sold reach our be many leveraging Greenhouse platforms potential By ideas.

Turning to Asia.

move to region. forward We this continue important in

to a fifth the this in With store and in Singapore. we source and stores from distribution sales way Singapore a This into our quarter, as distribute third center efficient running, more product vendors well we cost the During chain up store our provides new can Kong our effective digital region. opened product directly our capability Hong third-party as bringing supply fulfill up our to and in channels. and from online

to us driving brings strategic That productivity, imperative. third our

with success and continued provide more and and us business productive. addition to digital tools in logistics our to investments inventory initiatives, analytics attention our management even expense to In management, make

machine engage or that to in whether lifecycle harness our data framework more built maximizing complete management customers, us customer We've for learning us with make utilizes order a our to their how that's relevant they purchase. around

example, capabilities make Sports allowed the search relevant, machine functionality For Champs U.S. conversion. on learning drives has helps and Locker to applying which the websites keyword Foot more us

spend developing is platform our and cross-functional efforts across these create driving release from deliver more or Another results experience to relevant improved brand them even simple and implement while customers efficient results. team allows model, Initial personalization, their marketing to data-led or to customer and campaigns data as to offering show store more their testing a marketing, topline employ an area the finance that as a and where is from directing from preferred personalization, latest a channels. favorite us

That leveraging our the fourth of us to imperative, power brings people. our

can our launched each workstation Lace and learning us system we and ability This interactive mobile new educate to quarter associates. This communications a training path. empower and new learning customized engage, It associate via associates or our is provides on Up, accessed the to be platform.

just shift minute. sales expectations. leaves exceed more Lace Every few engage and time and with in, to our Up their them within associates This clock floor customers a the hit can with

to work inspire gratitude I is Foot sincere dedication quarter Before we Incorporated. and youth to progress results want were able to my their Locker every moment to continue, and express that associated each achieve this culture. the we our to at It take through did journey and empower a hard and continue on to we make

get to number product digital excitement season the year. all internationally across No going. releases Yesterday, What new our will of U.S. campaign. Greatness felt be and we Annual and next throughout into will and the launched We of are a Matter terrific extending ready of our the holiday Xth of the with The start week Week and continue

are We making as company. the about are progress optimistic we a

remains poised towards position long-term our are financial objectives, we continue shareholders. to financial Our for value as strong our build and to we continue advancing

a I a Lastly, Week all happy of Thanksgiving, season. Greatness, wish happy and holiday of you healthy to want

questions. call Operator, up please open for the

Operator

Thank you. first question-and-answer the Instructions] Ladies the is line now go of and gentlemen, on The session. begin we [Operator Wedbush. Chris Please question ahead. Svezia will

Christopher Svezia

question. taking Good for morning. Thanks my

Richard Johnson

Hi, Chris.

Christopher Svezia

and just doing that expect the kind guys Apparel you I turn fourth about guess, can can quarter just kind because it? seeing bit in of of women's, of doing on we I sort kind little of you're a you And first, comp color some what Dick, of terms business, you're the in little a are success where add tempered it, know around? maybe outlook what segment the what but of obviously to

Richard Johnson

the to We're space showcase seeing to pretty we've Yes, we've as that apparel, to and the more product the respond we tell Chris, we've the that these storytelling women's, her open got got where seeing in business. right the spaces. in stories we're specifically women's got on good spaces

So get out talked dedicated and we XXXX. we've as U.S. we'll are those Europe, got into about continue spaces roll the I that in as to

an the So update on exciting again that's women's side.

little good some the down look, we've transition sort through On have been we got the of slowed side, logo a that a we've bit to on a into a of the all-over little and got inventory. of in franchises shifts cleaner, us, less men's for as transition going bit just

away right. also have step label some strategic a made private product, of our We from

next to get the we So that's last fairly from year – we're some numbers comping to or big over two. need that quarter

if an excitement around there LeBron with moving products, Likewise, excitement licensed of the year so this was awful with moves remember to lot the last LA, you not much year.

I quite think better year. it's much as not honestly, created but NBA last quite as a the LeBron excitement moved

got there as we've sort a good will of quarter. bit but product where drag So little in a we And this team that, apparel it. through of focused is, I on feel the rationalized about be

Christopher Svezia

fleece some about color seeing next terms go does Just some a enough guess to – know of And How the – you're you year, want don't things but there. segment I of working that's this I kind headwind maybe year? just talk to that on offset not next in any make for you about believe of less that? as things we of you're can that of

Richard Johnson

is Well, right. fleece critical,

changes, our a becomes lot weather of cases. the outerwear fleece As in consumers

quarter. fleece about we're I going feel positioned the So good where with fourth into

our more has team to We're a connectivity, get doing better great the about apparel on look concept connecting talk the work done get at the we'll storytelling we side, great more to that into footwear our As the with. February apparel footwear when the team on the call, with side. we're we job that getting is the but forward that trying connecting certainly XXXX, pieces,

we think we've to progress think And way work it's think made better I bit getting definitely we've it. we'll progress And little is to apparel. I stress perfection. a that the So team be that and at got we're again, here, I progress, at and moving over continue

Christopher Svezia

Thank And here. just Okay. you. quick last two ones

U.S. if specifically? And And in when gross think franchises? occupancy expect – think the Afterpay that margin, your you Thanks. Just about QX? maybe you how to merchandise versus margin more do you what on seeing we rollout when about are leverage, Lauren, do just

Lauren Peters

strong as element, we lot leverage a third quarter and about described the of as fact, we talked backwards result, we very topline for bps margin merchandise comp with XX So in occupancy got apparel. in from the XX

the you flat really the when to different turn underlying puts with so margins. And on a leverage merchandise don't comp that quarter of pressure see relatively costs, occupancy fourth anything in

in-store, really with we capability for layaway We've in so that had very response format pleased Afterpay on service been seen and decades. the that providers that But geographies. Pacific we've that extend of on bringing are yes, that's been in makes front, easier much And other Afterpay course, and interesting. to with the to we've our digitally

test So that. to we begin will

option. Of course, payment that's innovations on payment the There's all one of sorts just front.

will So for learn. more and we XXXX. to test look I that be

Christopher Svezia

and very you all the much, best. Thank Okay.

Richard Johnson

Thanks, Chris.

Operator

Cristina The of Advisory next ahead. Please Fernandez Group. question go comes from Telsey

Cristina Fernandez

Hi. the sort on side. And should Thanks. I that apparel to wanted Good How do inventory? assortments apparel clearance have of as shift category? about you follow-up you the morning. the feel more expect to we in

Richard Johnson

great job merchant this busy I Yes, think into done has a things team season. up we as go lining the

So it's on. think fairly marketplace the some are to going be around apparel going I of discount-led that trends a

I Lauren So It team certainly the of fit guidance within the will gave that our positioned. earlier. well is parameters think

when playing have of up merchandise through don't do the times the realm, that's that dramatic, to part fashion relatively anything quickly product you're at set you I is closer our fourth going quarter. team lifecycle, is see to into but and So move the to that

Cristina Fernandez

footwear footwear the into follow-up talk the change in the as expectations? on expectations quarter, the were Can side. my original line-up And And fourth for volumes as there as how quarter? is you about versus the look your far product then in you any

Richard Johnson

an year, been in at things full-year that shifts that's out. the about the they quarter in are sometimes pulled quarters but how and right. YEEZY there about of our quarter-to-quarter. We've fourth year, couple talked lot beginning talked day-to-day gave there's awful of shifts, last move last we the We've of was Well, always move forward. since Obviously, guidance launch

just We've different year earlier but the got got coming, the a last year. we So in YEEZY great year. than some it's cadence this launches benefit

see the So we heat in coming basketball category. continued

and casual Force products Jordan is and basketball excitement player some around from specific Air of driven products. some lifestyle There the We Hardcourt. Xs, the Adidas by AJX signature see great

feel footwear calendar on just won't business based based we are the the about feel last from perspective. I I again, There at good our where a comp good vendor But So from and exceptions that some on where is. to flow about we're footwear year partners.

James Lance

Was there Fernandez? a Ms. follow-up,

Cristina Fernandez

on the Just footwear third quarter? any color volumes in the

Richard Johnson

volume, mean about performance breakout the Footwear driver well. being our men's we've and don't women's volume in single-digits comments performance really clearly, and we by family footwear high I with with talked across as of business, right. the good strong kids

that right? the can across at and that that, was in really a geos about strong was we I And only, talked I weakness the little the the banners. across footwear that and of guess, geographies performance was Eastbay. bit The But and the weakness beyond add banners, business footwear consistent

James Lance

Christina. Thanks,

Operator

ahead. from comes go Boss JPMorgan. question of The next Please Matthew

Matthew Boss

Thanks. Great.

talked for So Dick, this I comps guess about run multiyear a we've you ago, quarterly maybe digits still versus for single-digit three view mid-singles rate cut expectations changed? shifts low mid-single the for clearly as the business? what beyond way months the along that it's do And year, the

Richard Johnson

that this quarter farther apparel a really Matt, little a of I ahead what changed, that expectations talked some this on of and timing would shifts bit headwind bit front assume that's of about. we impact quarter a bit it have obviously move that get fourth and that met. pressure Well, launch some taken is weren't little we the the quarter, a of was we'll little and

grow to on geographies, footwear apparel right. opportunities front, work forward, partners identify with I imperatives on focus of business single-digit as the vendor opportunity it a in our for the mid think across us, Going we we growth to is as the expand and sort to business, continue strategic continue probably look our the

that's there up On the and going the around we see in is work topline, see Washington lot did we of about excitement really grow. that Stores, lot the Power opportunity a we that. where the on And a we of talked Heights, things to

that how women's spaces great us. So figuring out commercialize These can for we opportunities bit. new are a

the So us that's to an opportunity going every we that the time to topline. create that believe improve we help customer experience, drive

Our with are leading us in vendor the think, our concept great we to that work relationships again, marketplace. distinguishes partners

we While take work the team job great tell is can of that. stories think best our around and really great in is we ourselves I to doing their marketplace how we it concepts a and them, differentiate

So yes, I on opportunity. is the it mid single-digit think topline a probably growth

Matthew Boss

Okay. Great. then the expense just front. on And

think you do to at out opportunity? the year opportunity that five-year we see today? have dollars maybe as about leverage SG&A So on Or bell investment step laid next a mid-single stand Day, meaning I is we digits. last five-year SG&A guess the we on change do more opportunity curves leverage? where two the that Analyst the we the average how years is SG&A grown as look And so multi-year more linear back-end loaded

Lauren Peters

and been sounds along, you've have like us Well, it you tracking been.

You've in right. dollars the seen growth moderating, the

X% more So in it spring like XXXX, looks the growth to look X%, like X%.

X%. Third quarter was it

invest you opportunity. are in we the long-term mean the the for getting to can as past spike, growth I continue big So that business see we

like in for in the guidance. all it work there. asset a tech, of been we've They plans that's but do getting As our We're have place wage on. are and both we investing bit pressure and described, investments in looked on some and healthcare incorporated help We've us that needed where foundational to we to in foundational can some stuff the also of our been a that, that's been so putting minimum our associates. critical with

Matthew Boss

Great. luck. Best of

Richard Johnson

Thanks, Matt.

Operator

Deutsche ahead. from Please The Bank. next go Paul of comes question Trussell

Paul Trussell

morning. Good

Richard Johnson

Paul. morning, Good

Paul Trussell

able third strong the updated the just Matt's touch outlook. through again Maybe comp In challenges around to apparel on of trends. question footwear overcome you to the some quarter, were really

that knowing we had don't to different So hone you for in you perform Maybe discuss the on around flat, you did this more levels bit kind expect coming. that fourth at a front, of compare categories updated in has maybe what the perhaps quarter as that maybe tough on previously? terms footwear same of changed outlook the

Richard Johnson

of guess would talked Yes. just that about timing shifts some I I Paul, reference right. earlier, I that the

year level bit. all spread out You're YEEZY a of penetration the a of aware been from ago. That's

pressure So early guidance all a didn't originally timing in our that little when put we bit of put know of that. more out year, the the we

seeing I about it in lot As it, talked we're the basketball, that performing signature a the of by we driven nice casual basketball think of a but pick up about, well. side categories,

some first up two-year we two on second last stack X.X% look that two-year to were – X.X% it a of top stack, quarter, in a quarter, really at were of we third going from guess, we I the is in something low-single in year. years We're quarter. X.X% the X.X% when stack, the digits

So again, we're in some business. times, what of the about that relativity and a it's comp up know we against you're

So we to it's those there comp responsibility our is numbers. that – know

other is that's going a impact to in unknown We've of is week got the a that shift day Greatness shifts little a The extra Christmas piece how later. delivery us, an bit Week right. week. calendar of There is an

lot calendar there an awful since of XXXX. been this has seen haven't changes XXXX We and since

bit accelerate. a see Paul, always They that team our up business We a perfectly. great is. think I and done. But the little line has a on see putting two-year a – reflection I X.X% others a about some the comp good as little puts even is work earlier, I some So always don't good feel takes. where over on There's period We feel I categories models slowdown and said footwear bit. our

Paul Trussell

are or the of color. just maybe loyalty the some curious on if have on you can also touch your XX the of as then look kind excited as And being program, early investments about that Thanks And and a think more you from about over perhaps the of which made, in that where contributor you learnings Europe? of we those most side ladies about you've we FLX for partnerships that strategic months? next

Richard Johnson

Yes. Paul, right. Those questions, are great two

quite part part In So we're seeing the the an that from early were two that program, were are women different on really U.S., at people the program learnings the FLX Foot that of our of like books, Lady loyalty uptick Locker. we honestly. VIP that

benefits the we've sort a right. that see access they have they membership what like the with and they them, to belonging So and from communication got of that

brand. with get we've and as the use benefits them. are Lady to them seen to that meaning points engaged We've more seen Foot Locker them So accumulate be them a

one broader was had get changeover, So all We a across we through And we has get got in positive use so of been many full-blown there. that sites, steps launched to you'll a to to there apps sign-on single good rollout an we've went the before that to and through go through. news in as lot FLX U.S., able digital ready which imperative of the just sign-on U.S. we our be a

Europe, When first it's the a program. really they've I at look membership time that had loyalty

spends he make to is wait right. seeing of men their points, way she little redeem a we're that's expected. bit her. that benefits if something whole to you mix spend sure He they willing that reaction, The will, to So wants for really really a women than for The exceptional them is different quickly. different we more for and

a is sitting like dollar this it's pocket in this a burning pocket. in hole that So

two So rolled We they a in France and learnings more couple coming in there out just and together and countries in are nicely. UK. FLX are Europe, the different

will learning to fourth have time we by our quarter get the much So call. we more

As sits the the have FLX U.S. just launched we across today, will schedule

stuff think FLX So on front. again, I the really exciting

the got the connectivity and great Our way team the it with they've is thinking job and they're that about doing consumer. a

number excited great and creative going designers. forward industry things CarbonXX. with with the done exciting On goes do right. continue the investment PENSOLE work really to with made the and we've the Katie couple We've I'm there to first D'Wayne and Group all investment honestly, to of really Paul, new others. of a the front, about of And we got them fuel back that It team a

launched just Sports an recent launched products number investment We've that of Champ most NTWRK, of our had we've had PENSOLE. NTWRK. a event – on a with number have

tremendous So value. they all add

out I they're GOAT think doing. secondary for the about how Eddy relevant at to with consumer. more we We're figure the best experience and make and them Daishin work market great working our that

Awesome footwear pop-up we've a in have a pop of was small up, team have been Locker. New and Kids by at section powered Foot York, able physical her had that Rachel Rockets here a to where

that And the out opportunity infectious. team around kids got see the at Jason the tremendous they've and energy Super and is Heroic, passion it's play So we getting there. to

our think our become in across the our them with total them invest bring more to team excitement of can investments. We with at So and they passion I of And work they them, think at people. about all with we'll all opportunities and that these invest with see and environment all think purpose, six And to got I think they how of to and I FLX, point, look all people great I part continues metabolize the continue ecosystem, core these as we that investments. we've brands. and this

Paul Trussell

you. Best Thank luck. of

Richard Johnson

Thanks, Paul.

Operator

comes Credit Please question Michael go Suisse. next ahead. of Binetti The from

Michael Binetti

morning. the understand only taking flat points a model. one quarter? sales It guys. in Lauren, SG&A Hey change the like here. Thanks XX translates how of our to just rate a Can fourth help in basis on same-store run Good guidance me question there. a bit for the housekeeping of you SG&A seems

So I understand I would there if you tell about? or any it, think if takes is puts sure should or me make just I to

Lauren Peters

Relatively delever on XX flat the to topline, flat Yes. SG&A.

in SG&A So described, that, on the do moderating. math if I've already as the you growth

Michael Binetti

– anything seems the reason fourth the there point the down leverage callouts Is some on there like in quarter? any moves Is for spending there? it

Lauren Peters

in growth leverage We're rate SG&A comp, in of point but than other to mid not the ready growth call moderating. anything single-digit

improve elements continue to So lot the that. an we of do work look for awful on to opportunity to

our helping spend. to described effective way how payoff that's heard we remarks, are we've prepared done some learning in machine with that You've us in of and beginning things that our being digital more marketing the that

which app training just Up deliver learning helping customer Lace describe all, a for great experience. us heard our to You've them better associates, is

and talked improve the things of on the efforts backside working house. we've point. these leverage So that about we're RFID, on are These the things the that our to others some of in past, automation

Michael Binetti

Okay.

back would would one picture, say I here. up guess Dick. then bigger and a ask I me, Let commentary listen to combined the

to rate. the spoke revenue growth question mid-single You about Matt's digit

described pick this year against those One the thinking goals get up? investing year to business the leave needed comments Lauren, to you would laid tend would on some the catch-up out you pace next in you felt that the that you a as of in. five-year like algorithm

the can I'm like business start – algorithm to, four specifically year? So you'll next year, point you Do years next feel deliver I years after the this you obviously, wondering above do year, ask feel we about of if just improves to I'm XXXX. see the some pace next along leverage like need the the

where you me And looking I'm versus growth earnings about in Can with this comfort mid consensus, and the your the asking the revenue year point year? are year single-digit as thinking of your mid-singles this next at opportunity now should on context XX%? for describe the to some to for like guidance in that sounds consensus still next improve long-term, it based leverage is investments is of

Richard Johnson

time level our Well, in we'll puts call, about that five-year talked more horizon. the sort Michael, across Day, won't plan quarter the of our talk be XXXX much fourth and Investor on we our about and it takes

think of a to of Investor benefits relevant well The we and some to have will time. of that, going investments that about talked continue will is at investments to get continue it consumer the but the to there our be as be where Day the I – stay be period will over we cycles there for then reap investment to

XXXX you XXXX call. commentary not ready get into are fourth consensus on quarter but at, to about going So – to and all will I'm our the you're we of where certainly comment

Michael Binetti

lot a guys. Thanks

Richard Johnson

Thanks, Michael.

Operator

question comes W. of from Jonathan next The ahead. Komp Baird. go Robert Please

Jonathan Komp

Hi. Thank you. Yes.

of to And have to a shifts sounded you I'm saw curious And in just if themselves maybe some changed just it of about better. directionally different months ago? of you kind like last little Just some a apparel the shift any wanted you were maybe expecting? sense or quarter discussion what on apparel I'm pace follow-up optimism about the get trying versus half. expressed of the understand to than talked Dick, you the a the were differences few second

Richard Johnson

little I the time. right I at anticipated mentioned changes catch-up The moving our is about the changes, little the what team we the different Jonathan, is pace to and I But direction, bit a the a than again, expected, Cristina. different are bit think ability to as in is

apparel need which I but significant going it's XXXX our think the business, discount-led fourth the team for fairly do inventory, to not us to of up they a be to what quarter, to sets prepared in differences, apparel world do and is through it's a move right? sort

in we to of have exactly it's when that is our as little bit happen shift call the dissipated going headwinds is exactly But are inventory a again a to – a when bit. it's to catch-up. thought and certainly business, There going would the hard

to So we're on I got mean at, where I'm but know the front. apparel comfortable we work we've that do

Jonathan Komp

you and So guidance color follow-up any Okay. the That's one on the difference just comps across in quarter. channels, outlook maybe comparison helpful, and formulated I'm given fourth on curious be channel? color face would of how direct extreme then helpful. more part in more that the the maybe pretty for the for you versus just the any there for stores

Richard Johnson

channel-by-channel. connectivity the gut to about I how accelerate. When season, you we know level think seasons feel, the guide certainly experiences it is all a think is digital don't important we the But our digital Well, consumer. from of the one holiday

the I – So because from Black are from guess the all what's there Friday early. deals November, changed out to Black

The puts think intensity can work digitally. around I the and be everybody done days the Cyber Monday product that digitally on that sells pressure certainly

with we Lauren So another the to digital those holiday be have out. season to our good stores. sort I expect times I think stepping consumers during with in of the This the where mentioned periods now buy consumers. one is consumers quarter. of seem back-to-school are winning good winning traffic a in when of expect I the is one those

X.X% on from ago. year good business look against for So comp the we channels. Again, a both up

I for the think as well-positioned with their are they all post-holiday to the consumers is shopping gift team holiday our and cards. with win of

Jonathan Komp

That's helpful Thank color. great. Okay, you.

Richard Johnson

Thanks, Jonathan.

Operator

of Saad Omar Please from Evercore comes question ISI. ahead. next The go

Omar Saad

move that kind that it is Thanks away the of from? if aesthetic questions, shy Is performance products that's for big of customer And logo, name taking types follow-up possibility? the to the a the my big a that seeing just is – towards on you're more a wanted Retro quick the case, ask brand apparel. back moving it silhouette? Two question. of Is

North data. to the about strategy, local localization wanted And hyper the the Stores then ask using community kind activation, American of I also Power the

five have think year opened Heights. and one you I Washington of in the course, you last that

And what would or those I I think from the going convert years with few update think pretty next a Power more the on the aggressive formats? get opportunities more over love of on and of what's into Thanks. those Investor you Store your an are open Day, of there? you to those locations plan kind had to

Richard Johnson

know that it's casual-led, right? going and is on performance-based, product. aesthetic it's going much but on very slowing Well, Omar, down really of it's logos that stuff a more been it that's than that's a still marketplace. shifts bigger of front, the mean, it in has the to don't the I cleaner one I is on Sure. aesthetic the cleaner a the much apparel bit. It's sort

is Store, community-based, most is results seeing right the It but now. Heights it Philadelphia, from great got When from the the Washington to for most Stores we're strong continue and community-based comes we're we've as well. Power where it's that clearly Power learning the learning Detroit or one really

roll of communities So think the period. five-year we Day, these did the Stores probably talk, Investor XXX-ish the to opportunity I sort we We of based potential Power in the see over about out. talked

level you each proper upstairs. our store the featured Mile it about right women's that Washington move men's of and of on had these and learning activation zone the we are in under-sized business I the and We're and We tell feature in right? We to business, Heights we Heights. we will spacing from learned and when X sizing in women's kids the the think I main Detroit Washington got women's

connectivity. So we a think in again, case I the each local lot, learn

in times of the couple with a house to real and effort of us them Grown up we've local some has really a sort those we've Washington in to they're but garages DMA and in bit designers, the some and push very supply crew, brands local of Heights, really may out they to of Home couple as consumer exploded have of success connectivity The broader products. we're seeing guys actually a operate a resonate them skeleton able with seen try a little their that they the with

importantly So to a they of and opportunity the to But not them community. create it's have provides right think really we we to opportunity. have have believe understanding our We're unique local the in learning the to going rush rollout, be a location each partners with to the vendor most we that great because experiences, of and communities. with connect to right connect the

Omar Saad

That's interesting. Thanks. Have a nice holiday.

Richard Johnson

Thanks, Omar.

Operator

ahead. from And Poser Susquehanna. question go comes Please the of last Sam

Samuel Poser

Thank morning. Good my for you taking question.

mean of I exactly follow-up want on guidance a difficult, to guess, difficult is what a QX magnitude about that comparison. from X.X% you've in Can of – to gave changed and So on sort questions you the I at I X.X% comp the the to other mentioned of you the guidance, regarding that, end Dick talk today? basis and in answer a when us of the what one stack

Richard Johnson

different off been already apparel been I've than a than things on, right? YEEZYs big the headwinds the I bit the has expected. The of the need timing I we have little expected. mean severe So use Sam, covered more with

obviously. that that earlier out So have those And dynamics the guidance. from there, our been are changed known has again, really the X.X% we've

we've it tougher the level has the bit we thought of becomes and as had we performance Eastbay a on has not year, the again, apparel But than expected performed these in YEEZYs at the that that little earlier would. side as a that things headwind. become the shift benefit

again, changed biggest have those the variables from are that guidance. probably So earlier

Samuel Poser

And were the know guidance when or the so exactly they to when many QX? how end launch YEEZYs going didn't you at of you provided

Richard Johnson

shifts because fairly at of, you times as both so… launches Launches industry quantities really move Sam, No. date closely. are you aware dramatically well follow the and

Samuel Poser

in there's January. is what and understand one in From is tomorrow there there a mid-December, – new launch launch a a I

launch this issue a pairs So than is number of a issue? more

Richard Johnson

YEEZY November of a back YEEZY year, – launch launch calendar last combination, November, a of had go launches. in week-one always Sam, November and week-three YEEZY of of YEEZY had right? week-three in YEEZY a you in November. We It's and If a look YEEZY we week-X launch more launch November, at launch in a the

We YEEZY of the December launch of in had launch had week-four We December, the week-two and YEEZY of week-five right? December. in

again, quantities it's its dates that always both, launch So move. and it's

share we we on what we We base what know. So guidance know. our

Samuel Poser

getting you would the be weren't know or be didn't at getting But I you you mean when time. apparently would – you what it

half lower you – it? sure going single-digit than if that and Why guide missing you after of did why you you to mid tracking what weren't year? a going to to get when the first were did were comp in get the So after

based to because EPS Mid this have of is on talking And single-digit far like X your guidance Street at growth EPS going so of year learned is range some sort your guidance of range? happened again to of to at of And the the single-digit on? as X.X this of you the are things guidance, that what you it narrow the and and the low-end for as full-year? also, looks from from mid-single-digits very of mid very what these growth range the low-end pace

Richard Johnson

right. Sam, sorry, your I'm is, not what question sure

known So that. but have learned learned? aren't what that we launches – comps We've we've necessarily. We've learned that

within range. launches a We expect that will fall

the at assumptions with right? time our the again we are share provide guidance, that in the Things change share what we industry. guidance all So Sam, we our you do in

worked that industry. in the think know you you've I that

the long You've industry around a time. been

Samuel Poser

year year, But guidance probably singles So the can presume going then the did things of given this be we single-digit a discretion half trend on low change of wouldn't part valor low comp as you're that would back current you'll for trends? provide year, better next if could be to the year? to based better just way the it they towards this the guide

Lauren Peters

Dick give we For about our what the quite guidance. results. to from a has changing we'll bit as can talk It's quarter be run described guidance. annual change And explained when business the to of shifts a quarter-to-quarter, be happen we about I fourth us will and guidance We'll for detail. that XXXX time example, make annual way on providing now will reiterate and we it's we

Samuel Poser

All right. very Thank you much. luck. Good

Richard Johnson

Thanksgiving Happy all.

Operator

would Mr. back call like turn remarks. for to the closing to Lance I

James Lance

call, will Thank results today. Please you February at next that joining for The will take anticipate XX. our place earnings morning. Friday, follow quarter we of call Okay. join release X:XX for which AM again us fourth on earlier the us

Thanks again, happy and Thanksgiving and goodbye.

Operator

this participating. you. Ladies gentlemen, conference. Thank and for Thank concludes you today's

disconnect. may now You

Foot Locker (FL) 22 Nov 192019 Q3 Earnings call transcript