FL - Earnings call transcript Q1 2020

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Operator

Good morning, ladies and gentlemen and welcome to Foot Locker’s First Quarter 2020 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 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 impact of COVID-19, effects of currency fluctuations, customer preferences, economic and market conditions worldwide and other risks and uncertainties described more fully in the company’s press release and in reports filed with the SEC, including the most recently filed Form 10-K and 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 being Please call that this recorded. note is

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

Jim Lance

Inc.’s call. conference operator. Thanks, quarter first Welcome everyone to earnings Foot Locker,

net to $XX related share an results income a On reported in to have million matter $XXX a the first to to the million share charge $X.XX today’s tax previously compared first periodic loss net same rights of a loss charge earnings reported the pension Last to intellectual As for of and compared million QX million $XX the non-U.S. related company year, last a matter. of of a included a year. certain million charge was quarter pursuant we pension related first incremental discussed. basis, pricing $X property earnings quarter last This advance $X.XX year. quarter agreement, per $X in release, the revaluation quarter the to per includes year’s the

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

uphold in hosted with usual. be remotely different from social distancing calling being protocols The is today’s different shelter-in-place of The and call than will bit locations. orders flow in order to presenters call a

our on months in business remarks best prepared with Foot ahead. and Dick pandemic, how and provide and our Locker update an Chief financially working the Executive operationally begin staying position Chairman navigating connected is the Officer customers COVID-XX to who will the will Johnson, We with

Lauren As Human to Senior quarter term. highlight Vice Executive President to the we discuss control and review of part Chief are and we Norberg, taking the as have and of then protect and members the and Officer reopen store will safety best Officer customers we longer to team continue Resources health Chief Financial this, for fleet. will maximize first our results global Elizabeth steps Peters, position our President liquidity, and steps near the business costs and Vice taken our

your will and Following our to respond remarks, prepared Dick questions. Lauren

turn I’ll that, With now it to over Dick.

Dick Johnson

and morning we start communities healthy everyone. you the would around and and saw would our team the the business it of customers, many retail stores. what our and considering use by control what like including impact online, business the the living to all flexibility, customers, in leveraging years coming peers in to to members, from all and capabilities losses stay disrupted our on families you over we us our forward, operate closing world. severe quarter. by the and are to on time devastating during against we extraordinary our industry Normally, update an fully backdrop this the so the of retail, them connected the Instead, factors we and call in so past I that ensuring our reopen continuity, members our the in we you, the the our remarks technology many starting Jim felt are our made to business hope to measures I of customers and most to and been review and the months. facing stores financial economic with are are we in we of significantly the which good serve investments we guide well-positioned ensure COVID-XX will the safe. our team to challenges protecting of to Like response the digital our position health safely several Thank additional use today world, business has step and by of with have the across acknowledging our enables taken actions unprecedented can to our prepared we this protecting and pandemic broader have

keep the sneaker their early serving our I our and this and time. to business our stages and would thank obsessed our culture like business Today, customers this the to we to communities recovery. during efforts time. that road of team for Thanks able their said, support around our operating members we our With critical were youth continue globe in during are to dedication, to

Our back better. plan we and be than as or to is better it to before be refer to like build, back, build,

have to internal reopen we already world, and that fleet local, additional an state have created. align today, over all XX% framework more but in openings as reopened with scheduled also of government we as we As approximately that around we the guidelines, of store X,XXX ensure with stores, our

doing We our members for safety customers. team right making are first and putting sure the we are thing

not We ramp media The capabilities. and drive social nearly To when good ago when made direct-to-customer to clearly that orders up sales. peak. news evident orders us able is channels elevate and our XX,XXX thanks into our through was logistics and have the want digital to we DTC it single to to processing our that considered processed put XXX,XXX in a investments were that with was shop This a customers was long perspective, we channels day. our to

team to orders. utilized interruption online and any select retailer, the evolution enhanced an our the future. customer at who at benefit omni-channel fulfill to both enabled connections to and We stores will has continue are distribution our accelerated as without us or BOSS, focus us we into orders centers This buy members those our digital-only grateful to fulfill those ship-from-store

and strong Athlete, position, is store only survive to levels We our and banners view, position manageable have position but job ensure crisis, Lauren of point athletes a their invited The this initiative Champs social well-positioned student rationale financial Never sales support inspired purchase to the on support tremendous not her during high our a to come in a entered relief how Athlete Not athletes back improve communities relief stay initiative done a a and debt social of included in to Sports the team causes of customers creative this the prepared, quarter as and we use to Champs sport media launched From time. our funds company strength. efforts, Never for Not given to for relief cash An ways Sports from and and with the store. COVID-XX based which to be to are closures. that Eastbay COVID-XX they and To gear schools An Eastbay donations skills, share ended the to they channels contribute from team inventory to share

$X.X We your translates committed to it giveback by to the important our giving communities the more to footwear season, best. all than and best global is confidence a in million back-to-school geographies across know the students into feel do their and For have look affected that of pandemic. how to we youth most

the bit through deeper some to me into we With navigate of that, dive you take a crisis. of give a the actions continue took specific let to and

safety our In been has team their and we in continues our and be of to North health foremost, of and the top customers, First closed most members our March, America, Asia-Pacific. EMEA priority all and stores and families. of

business we our drew and temporarily largely safe office successfully a on and environment. majority of a to in expenditures of to and contact enhance offices stores, manage measures XX% implemented from our same ensure environment to centers, for We halted significant home our transitioned repurchase address procedures team centers, At full number financial the our facility, able the our a year time, share work members our program. long-term planned liquidity. vast team the our near we also sales, technology the We manage credit capital and by are Across and distribution working of down the reduced investments. we reduction established impact to members customer because

thoughtful cash our After by Board, of our quarterly suspension today, consideration we the announced earlier dividend.

capital be the take to believe at prudent ultimately environment our the enable this shareholders current we shareholder to action that to and time us capital responsible create priorities, over While the and of value continues to given returning our is will this one more allocation one long-term.

our Board and across policy April malls Our dividend on did on in most continue we to not place markets, our a will make With evaluate of stay-at-home rent. basis. our quarterly orders closed payments

coming evolves. landlords with in with We our come as April resolution to continue term months a for longer to the retail marketplace the up work

X our to team the weeks the limit the paying financial strong closures. members us Our by to through despite first financial global our on team position the pandemic salaries impact members store enabled of

operations, However, cash compensation second portion without the cash when normal quarter the would our stores to notice. suspended directors clear we for the we more on into and leaders insight April, reduced announced negative of company. to and and compensation impact the further preservation limit myself for In until senior reopen Board the the measures return further

program place. furlough for benefits. team members team of program in to begin certain our Australia team made certain long as need members also receive how the their majority supply be members store part-time It’s and decision in as North a store well healthcare We difficult Furloughed to continue the in furlough members other chain team U.S. the and to will in America unclear

back team to and our extended paying back for helping store feasible time talent. towards our our customers. are soon getting our and our to we is as members with decision work already continue connecting retain with strategic However, in recovery believe to working period some of to We place top it’s as accelerate associates an

working orders, supply promotional our included future assistance align their clear the environment orders been canceling anticipate more We have to or in help demand. channel. closely we adjusting forward best the and partners with delaying perspective, to path on securing between XXXX. and inventory an a From This fiscal very vendor has

we end appropriate and in position. ensure partners working with year the vendor healthy to inventory However, are we that an our

a store of body from initially before action would of force areas ready leading our This functional this closures. Another to the task get orders special to important we in crisis we of crisis task and been planning shelter-in-place was managing has important all and on Officer, company’s members Elizabeth the force reopen. took switched Chief creating Resources COVID-XX work. consisting Human early how the focused then the Norberg, through

today details to about build, our to So, more to we you share asked Elizabeth? journey back, better. with some her join us

Elizabeth Norberg

Good Thank morning Dick. you, all.

and containment customers, not Let I plays address team principal for dedication me sentiments that to and continuity, like how their members more the could how of be Today, and communities to Dick’s extraordinary this challenge our would proud begin our We with path business recovery. we time. each virus about by of forward their our work echoing into XX,XXX other. dealt

We us time have team better. back, build, our a rallying helps spent with plan as our to together a that framework developing cry recovery

as From beginning mentioned, operations customers. the global and help had March, In of speak I protecting crisis, task them team the very established of force will Dick us our four today, we our protecting this two pandemic. to to members we emergency address priorities, a

of measures our and the today. all of across this force health remained up that part the organizations new from key place leaders of in diversity implement quickly areas and Given task to world. safety We business, in every of the mobilized breadth our was business made

our the new corporate offices almost and made our close normal. of we first became working was overnight decisions globally to remotely One

physical teams and distancing, focused culture we a distribution While We safety and and centers efforts the quickly covering. the critical including focus support members. closed, and customer health to safety sanitation our sanitizer, provided increased and already and supplies, our execute stores number anti-bacterial protect across of a wipes health team strong implemented hand and and of were cleaning our disinfectant, we to centers our face changes had

We flexible followed of and scheduling work practices also staggered work all implemented government guidelines. course and

essential call For service and IT centers our we implemented other areas, centers, similar protocols.

themselves or new their healthy telehealth access time-off need and benefits, it in those This care included We mentally also local providing loved physically. resources communities paid of ones, policies for designed and staying promote a variety for to to to worldwide. implemented who

build, And looking journey angles. are at we from back, our ahead strategizing better, our to recovery all

we, can framework logic a our guide cadence. adopted decision have to we, reopening We should

and have world members, In that the guidance success. playbook developed guide will our of in customers stores, our locations elevated government to our standards and health protect a reopening. team our These incorporate and remains global by protocols our we workforce our terms component a procedures officials the of Communication critical standards. own of of our to around

at Lace-Up called customer learning and we as and communications micro we members, internal team update, tips. store leveraged reinforce Lace-Up our each used The learning reopened health train measures and provide areas and covering. In of barriers is important customers local stores, face behaviors service to are compliance gamification. and physical to platform company plexiglass installing For in taking through our cleaning we protocols. information, are required, safety members where distancing, include wear checkout we enforcing sanitizer and members encouraging hand location, providing team with enhanced to guidelines, number limiting customers and regional the and and team implementing

move As team with we to standards health members as evolves. forward the to these our we phased we and customers protect will and evaluate our ensure situation reopening, continue safety the of

and feel our We are that being our ensure working team members to thoughtful and customers safe.

with that person we I our for and know excited all the team engagement. Human elevating globally reconnecting say omni-channel when our members customers about our of Officer, As in I customer are Resources speak Chief I

turn our path more to I back to Now, over about will speak forward. it Dick

Dick Johnson

With our stores second in stores as Elizabeth. quarter had at began XXX in first reopen Austria, has our during quarter. context, markets America. as as perspective, reopening few we and stores amount more in that Germany, to well Carolina tremendous first Netherlands handful in April, North we in fleet. initial we our We a South the at the provide earned a as opened those the a To late with began weeks time, across Thanks, and helped some EMEA and Oklahoma of team end, that Norway phased and of

reopened had every we XXX stores of across reopened XX yesterday, in In we located states the the open except region, a EMEA, are in, America, XXX have in countries stores US XX XX North Canada. XXX and in total As country Singapore. stores Asia-Pacific of have of and

emerge. mall more weeks based to We tourism of are challenging. making few beginning we see results have been that are both we seen street A results, are strong communities progress our trends serve that on response in stores at pleased with and Locations local the customers. dependent are the while in, some more have level

In experience. we traffic Taken has store can in with our we together, is those to to their to an we back is reopen purchase improvements intent the to in so even pass conversion. while every high, meaningful task led be down, learnings and are we provide each place customers reopen excited learn back which force, stores that we better

process want I said, that With this fluid. to stress that remains

and continues Our for we health place to work our our associates have ensure with various precautions authorities to the that governments team the in customers. appropriate safely to operate and

the retail navigate imperatives. long-term to of Inc. lens COVID-XX Locker the continue profitability through on the growth also and we of and how to Foot best position As we challenges landscape, evolving focused for strategic our remain

initiatives. take a on to to want few I you moments to such update

business decided compliance and a in our operations Point after legislation. Germany, Runners other competitive assessment the First, comprehensive local Group Europe May, of the we in landscape in into with in consolidate to operations our

Sidestep Point will stores and Point Runners select with close. stores plan, stores, Runners be expected or Sidestep this XX converted the Locker to approximately stores of remaining part Foot As certain to either

and In functions and Foot Point addition, we Europe’s consolidate to plan the with logistics in into Sidestep in local legislation. headquarters compliance Locker restructure support Netherlands the Runners and

our Foot Runners year We wind expect through transition by Point continuing Locker down to Sidestep remainder and over the XXXX business occur to forward our Point fiscal our online this look Runners to new We largely serve to end. and of customers channels. and the stores

broaden the on to Champs structure the single I sport appeal and under athlete. the Sports school Next, leadership obsessed initiative to want update combine to Eastbay a high you and

evolution, Sports our and to of plan the Wisconsin headquarters Florida. Eastbay Wausau, several select functions to for from their and are demonstrate we across of in I Champs part in operations brands Bradenton, this teams positions sneaker they thank restructuring Eastbay consolidate Runners contributions youth and for want to into dedicated culture. Point As the company and passion the aligning phase the next the

talent to effort every in broader roles the Locker Foot making are organization. much We transition as as to open possible

better While our and for we decisions, to efficient believe allow experiences deliver the customers. will make these us more difficult they were company

global inspire significant a world. stronger the the crisis digital summary, an an across team markets learnings is In current ready and reopen our empower around and opportunity emerge even with to as customers leader to as that presents the

brands strong with unprecedented position, time. the best with past moment the world has us connections company we Our financial as the we in get partnerships succeed believe and strategic this deep will in customers that position our to

it over will that, now turn Lauren. I to With

Lauren Peters

Dick you, reopening. that proud forward and progress so far made prudent And our carefully to management am stronger. our has to best of even path and and morning phased and during navigate indeed flexibility, unprecedented Thank require These good liquidity I the team planned financial everyone. costs our and are successfully disciplined financial control maximize the emerge times

view, a balance sheet. just We fiscal To recap million from in debt stand of cash where million and position we let’s our of financial $XXX began in with financial year point $XXX strong long-term a the start outstanding. with

COVID-XX the and of our we the cash liquidity. increase our As impact potential took bolster became to steps more balance pandemic evident,

First, to purchases compensation payments, in for we took spending, team senior deferring members. reductions immediate limiting payment actions rent extending executives merchandise including terms, incentive other reducing certain and marketing, and non-essential minimize

credit our precautionary million facility. increase we invested In cash plan. first CapEx for year measure full business, under below well period. $XX our our lowered initial position, borrowed the our immediately projects and to the to in We capital million expenditures we a $XXX As $XXX the quarter, plan reduced million essential

beginning are from remodels share stores our the year. halted any XX billion of quarter to relocations full not this at or now stores, on the Furthermore, and shares XX% relocations did we we the repurchase repurchase new expect our XXX Included share prior remodels down our down new stores temporarily expenditures, existing spend program plan the under from $XXX planned this or we XX million $X.X authorization. and capital year, and of repurchase XX new For in projection.

Dick the As also second program mentioned, dividend with quarterly our Board quarter. beginning suspended our

of declared quarter in cash policy our equivalents. reminder, a quarterly all quarter the As cash Board reiterate the to a with first over our dividend to and billion want together, was position by will that these our basis. actions I prior dividend Taking the the continue ended evaluate for strong Board pandemic. $X to a we on COVID-XX

While this increase year, of million, of the an end from of reflects the of $XXX $XXX is since QX million it last a decrease start XXXX.

inventory, in with the quarter a a compared decrease on constant to year’s last increased sales. the Moving first to to in sound the result first decrease we XX.X%, total sales. On ended basis, increase hand, compared XX.X% XX.X% billion currency $X.X when on quarter. over A inventory XX.X%

to Our to ensure position. healthy a manage we of out purchases sales significant with merchant actively the vendor our is partners our levels team in come the crisis current decline of inventory working midst and in the

Turning XX.X% income sales as we our channel, our strengthened quarter to progressed of a XX.X% channel banner, sales region through stores and Breaking every declines the statement, gain. by driven comparable store while across XX.X%, posted by down comp decline the DTC with Eastbay. and and channels decline reported our double-digit a our posted a we

XX.X% AJX high strong began customers improve results of rose COVID-XX From Jordan business Retro to Jordan benefited each The ramp resonate the up continue early and Force approximately for Trends men’s, on adidas, several we in half most from DTC approaching our of in as saw our and Michael in key our launches. in Classic percent As non-essential by back stores and with Dance. XX.X% channel, closed driven out. demand Yeezy with With pandemic selling April across fact most women’s, heat held from series, quarter, the a The heavily comps, the styles triple-digit on being since styles to basketball significant weighed and the our business up our digital sales, XX docu last kids. items. of or X drivers and customers March the year. was pent-up a sought-after Air remained release of Last with on-trend sales, to

basis basis Moving the quarter. in to our The compensation by prior of decreased driven income and margin our de-leverage points and our XX% statement, gross XX.X% merchandise on the decrease point down was sales from XXX XXX income year margin. first the expenses in lower buyers of occupancy rate

promotions. while still margin reduce Looking on merchandise accounting did based we at rent work digital in our buyers carry in process. occupancy clear driven negotiations are abroad as payments did both margin in lower not April of position. the increased towards to sites, to the our order lower by our and The our healthy occupancy our not traffic penetration promotional digital to increased make rules, activity higher which We and U.S. our response with in compensation as rate, we a the the was well environment to rent expense expenses, as product landlords sales, a drive inventory and and

SG&A expense to compared dollars decreased XX% the or $XXX year. prior million

sales, rose However, to as XX% of from XX.X% last a SG&A percent year.

and travel to As sales. quarter accruals, as reduced align categories, marketing, the with bonus expenses our list of long expense variable a we better among such progressed,

However, was to in of of We the credit will as that slowdown flat $X earned prior our pandemic focus million to through increased and rates continue the cash a in income in the expense the believe on on stores. fiscal navigate the in interest million following facility cash drawdown of balances. expense to our year, reopening last We which interest our incurred diligently With our the in million led $X the to manage interest our expenses compared of reflects magnitude team year. quarter, will the our remain quarter reduction and debt first mind, the of XXXX. sales we preservation Depreciation $XX remainder a for the de-leverage.

operate. in of points year jurisdictions the rate due This losses we last mix XX%. basis various and to level in Our is tax at XXX where than came lower tax

the income shifts on outlook rate be quarterly quarter free as of post $XXX operations from of As first the at We full to and from million million a perspective flow you be we relied or think there look flow flow year. for about the and neither rate cash initial negative $XX first the year of cash guide in full quarter should due significant $XXX in of a negative cash posted the of the shifts million, tax may CapEx. rate, comprised

forward, minimize we of as engage can us the we cash progress become continue our burn and to environment. as believe the we comfortable As new level in make stores reopening with and look we shopping customers

reflect is stores While our impairment will these pulling levers retail for the results the environment, providing to The are excluded past in and our all protect the the Please of to recorded not seeking company tangible in we we restructure can $XX commitment not Any to updated Runners fiscal charges actions of half those light global part relate with assets to the XX our is with locations included health practice. for in from stores of that the today’s to our million long-lived impairment, be business, considerations. uncertainty evaluating operations. guidance are approximately ongoing potential the Point exit, note, results non-GAAP company impairment broader of approximately Sidestep plan consistent XXXX. of

sneakers inspiring sure them. our empowering our we Before necessary and make youth feel and safety culture customers times, we remain We of is I team to are and passionate into that are coming associates about and customers. the challenging focused are stores. your on reiterate and all to first These and and steps want priority on believe the but our to move our safe customers taking our we health resilient questions, our

strategic emerge connections We navigate have financial with well-positioned with We to not relationships a our crisis, strong only even and through vendor believe our this deep partners position, we but customers. stronger. are

up open that, questions. please With operator, call for the

Operator

The [Operator today go ahead. Please question you. Tom first Instructions] from Fargo. Wells of comes Nikic Thank

Tom Nikic

sort I Hey, last of be the are good give any the questions. opened morning. are they very would my trending said reopens Thanks to year? want the around relative period those a far. ask, Yes, to stores think stores? your of XX% color how of reopened, Since you thus guess they be seeing around have about store sort any would can when for Is helpful? of recovery same help have you performance I taking you I there

Dick Johnson

Thanks, or this yes, the Tom. they all are reopenings you And the family orders got opened and have opened. are safe lockdown XX% were retail. we’ve been I to right period. and are – our But and stores strong shelter fairly through of community your and healthy supporting supported local expired We’ve hope about a and in situational, malls – stores street place or modified allow seen

are good coming We penetration doors. the the presence good into of consumer seeing or

our everything we customers, customers. exceptional normal, in distancing store and context get that dealing don’t people’s engrained a in comparative give we and tax while, how We’re some there done new the certainly the to updates, treat money those in it’s year-on-year, how to etc. has service out is to say and quarter-to-date for going to not we that’s demand stimulus do and been we’ve just give customer there the normal pockets pent-up for but associates, them refund next shop, about that they excited is with of money a social it’s so certainly be – are

difficult stores. vacationers those into more coming are of that The a see traffic, that driven places those situations. So, by streets obviously malls, people intentionality and but traffic the in are the tourist in again are more high down, we

we two high. is relevant blowing high of where has seeing with as on those sort in are is reopen. markdowns, rate focused are they of been on high the They really cities a that heat digitally we conversion both then and aggressive are well. consumer product tale And up the the They and focused the the merchant team product quite stores respond to places our that markdown are product honestly. So heat

us are I to we really think from. it getting healthy position opening bodes learned that well and So a each a we market store, for inventory

the the stores, that other half, fleet the first than stores. cadence of So have the of XX% future hopefully other group will better even opening a

Tom Nikic

remodel how and believe question, for there. to Can quick you Got a us plans the tell Thanks just gave permanently? expected And Lauren, modeling stores are I opening store close you many year. it. the revised

Lauren Peters

XXX to Our original if that malls described, given not maybe XXX elect was XXX, we got and and guidance have I we the some call RPG reopen today. it to stores to had

Tom Nikic

and Got and of all for safe year. are and you Thanks. And the healthy luck it. hope best staying

Dick Johnson

Thanks, Tom.

Operator

from McClintock comes Matt Raymond question James. next ahead. of go Please Your

Matt McClintock

morning I’m It’s hear great to you good and that doing well. everyone. voices Yes, are your glad

in I some The of one is stores locations a is is many your the these of – question reopen fear the key is won’t better right. are impaired of first malls there just, the be could of concerns I hear and real guess follow-up these on Tom’s this, is that into some biggest question, meaningfully that today, from estate – a there estate real back malls investors or

of So years, question been adept malls assess my maybe very makes bigger at Number have stores stores do recovery that – to to that you across risk? last opening of strip how you number that? one time it a move store closing takes guess a and do take us and another from you location, give you the Thanks. maybe sense road, the relocating you is two given I the in didn’t lead stores get XX can across you in terms the over it sales that the sense or when the typically for one

Dick Johnson

mall, about F with the this see market, some malls the just A the of out a part malls. all team risk coming team think you does is we the from the job to as great what Our And of risk is solution moving each that of the malls, if assessing off of I there plus talked necessary. evaluates involved certainly

the malls us things when they’re those but shop go go away, away, that wants over the customers very in engaged there time we shopping product of for to customer neighborhoods and that doesn’t that One is them. learned the we’ve in with bring

a we this some it’s of crisis estate put is are, malls. three places a the the Mile where chose And what So longevity our in mall is of that to choose in have be body with around it ongoing recapture that team to certainly Foot in the a sometimes about, there an certainly we talk in we in evaluating doors places think Eight thing does, team real this is we but might replace rate may have we of malls an the we an the a accelerant and mall mall, COVID across Locker great of at the difficult to our looking believe to accelerant, where stores opportunity had three bit that but example we are they it is replace pivot, where Detroit just off the Road a highway. work risk has

from rate all be don’t percentage it. the we good expect depends to certainly recapture a how those might it but leaves mall we that So are or get their decision on competition it, of makes all get part quickly three, or the mall either in – of the the also a of decide And options. closes,

a thing One part So the of that’s it’s to a we’ve and continuation strength to the had that understand the strategy and of business. clear de-risk that of of health to their have malls pretty front try the necessarily they lot is in direct-to-consumer of a are there not willing product propensity those not to delivered door. are shoppers, cash, higher are consumers areas the

a take as customer. got to retail, we’ve opportunities as pivot’s as it of it up pop off relates So it relates nomadic to to mall continue and retail, care relates to lot of the to

Matt McClintock

can just then hugely where thoughts is about most and etcetera. on the in follow-up back is including exist just question you. Thank this elevated brand heat, That’s year your business for And channels, heat that. inventory to across a helpful. my outlet? half historically trying heat And price I product heat, this get world in how Thanks of am

Dick Johnson

the is back second across There inventory and of will quarter there half. across glut down lot be a the I the great coming Certainly the product pipeline of is a guess term launched against something the high use I launched describe heat and product right. others clearly have technical that isn’t it, else. can but best heat product, we’ve The that high to glut is

a world it saw consumer about, started saw of get has and what our March, this talked their understand in half. we the shocked middle think little the We were to lockdown a fully huge that digital tremendous I of weeks people appetite. continue like they Lauren felt halt started – expect the but what as as bit currently shell in of there being the to couple the I to consumers, channel, – a through So product ground back a in the as consumer we – and can heat the on hands things uptake high a

we Our job the from to, merchant of markdowns cadence intent inventory markdown and push through I team product. year is see are to really a that need second to none healthy on high the product, explaining of Certainly, mix Lauren thought the sort and in heat nice position. we to a they will ending expect a balance did the the productive

Lauren Peters

and And the merchants will feel balance for good around, feel we looking that – the about work the of do those have very they good that be content done we year. do

Dick Johnson

just the the And vendor got we really admit I our that and through They’ve industry. – concern industry got this through gets they’ve same with of guess I’ll positioned we’re that for well an same start closely we’re and working – the the partners. XXXX, as inventory strongly get

Matt McClintock

the you Wishing best.

Dick Johnson

Stay healthy. Matt. Thanks,

Operator

Erinn The go comes Sandler. from ahead. next of Please Piper question Murphy

Erinn Murphy

Great, a the that thanks. taking. Lauren of just on inventory, I morning. kind you’ve guess and actions been Good for follow-up mitigation you

you approached about just promotional. vendors talked for is cancellations, then talk you’ve the half about the more and being back inventory guys year? of to Can You of balance cadence return look the how how

Lauren Peters

between merchants worked on those partners. last many So, factors vendor weeks the our all of over our been and have

maximize order for these the quality content at what on content to quality of things the looking to been at of balance content, all the manage the yet both of levels the hadn’t the through and Looking what’s the period. produced,

the them. inventory what responding customers how on upon to be So you take actions the will dependent

already quite I last described Dick to think answer as Matt’s in as question. well his that

you – of we on are against we So, There think an very how are to saw quarter built are I against, adjusting multiple position reopens. the flow for scenarios the cadence to and plan that we nimble the product closed customers we that and responding that that products. but about in up inventory responding that year-over-year the store XX% managing we’ve very our the focused demonstrated how with half of about doors first

place XXXX. we through us good feel to got So that set up and managing to we’ve a really healthy plans for in the position well about

Dick Johnson

I’d Erinn, of vendor through the our options what connected team connected just partners and we etc. our is with it as move – level inventory add we And can through really is that really make decisions work on these

will third with two-way back the there. it’s our reacts how vendor factor obviously be once they consumer and partners a the come out So street

Erinn Murphy

I to that in growth what am I kind trying guess XX% understand is plus of QX.

work QX numeric. more If you – cash and the now then understand the a bit there, is because trying you to from just are the is are does peak kind you as taking follow-up question see it you reopening on or down of the Thank stores Then in-store? you. reopen little stores

Lauren Peters

Yes.

for inventory period level assumption ramp very the need around there of how not to time. cause recurrence up. close them your And the So affected again of by any would virus doors the or any that whether much is around to

closure as up scenarios balance an expect the down assumption there you we over isn’t multiple ramp have will of point some the modeling you So done made then LY. the read to of versus react we ramp and would to market, doors and of that continue a at if the year but accordingly inventory

Dick Johnson

yes, the cash are taking stores. And we in

Lauren Peters

Yes.

Erinn Murphy

Okay, thank you. All the best.

Dick Johnson

Thanks Erinn. Stay healthy.

Operator

from go ahead. is Please Svezia Next Wedbush. of question Chris

Chris Svezia

how products, you long performing I just question well. of the balance I of you called back for glad know back, guess did – If just you first through things in Thanks any delaying could. add they move curious holding May? talk just May, business digital for just the are Good how potential the taking for how April color your performed you units if are side morning, And the the me, vendors, the of can of everyone. first you And digital side I the business about as are product on back-to-school, actually am holiday. that lot launches side questions. of to they any on to the accelerates. question, they in I’m as all my two, pushing you year that. further just out the and

that statement does and product how launch cadence for the Just balance year? look, the on of

Dick Johnson

second with answer get and the flux, of held always are Yes, to the May. pretty chain. believe launches don’t that is launch we’ll necessarily are Chris, back supply But fluid. first question back, I always the calendar being timing I issues things digital I’ll the that there in no in then think

today, calendar it follow know industry. the we I fairly see the expect to we So stay but as launch steady you

to you to weekend that weekend. So move occasional quarter from do month know month, to launches quarter,

back, we continues through really into the plan is don’t back forward. the to to think the or mix of again, launch cadence the looks, premise vendor as half. all our quick some the But vendor the And stays going QX could really normal. their strong in think on close normalize partners all world way this that Our there this I I based is work holding there partners launch that think strikes next I in think that folks team drive that sheet. drive of any the sheet, both our possibly I Again, be

digital your ramp on color, to team’s give we back the focus the May. and lot of ability Chris, it. in you going channel that and quarter-to-date only we into one up digital energy But to to with, question, the our efforts, when energy gain don’t have the So people’s on a digital of deal some put you frankly

a make digital better product think I etcetera. launching lot and presence So we to clearly retailer, we throughout distancing our us we as omni-channel April about to how and learned social a think utilize

expand. to continue our to penetration expect digital We

of that next it So new really in are the digital but that a comfortable as certainly shopping we the in digitally. to learn will this back presence, is time, customers some versus terms stores. are we know we got again, be consumers normal be same physical what balance At happy

both expect to continue channels we So, to accelerate.

Chris Svezia

you Got minor just on I could, gross as those conceptually if I’m of the pressure it. follow-up maybe move way can provide margin, really margin Lauren, Thank think one versus about – we any about forward. think bigger is profit, just de-leverage you promotional you you just those when and – can dynamics about to the related any to coming from color and trying product activity mix?

Lauren Peters

merchandise saw lower QX, has and margin, which fixed the DTC merchandise XXX a under de-leverage we which by I in again the normal conditions. margin in the was margin of rate the of business, Yes, will comparable driven rate, came rate but a margin XX.X% what carried out decline reiterate penetration largely from rate, XXX on the finished

though DTC. was balance. closure period that the at So quarter the a in on promotional in – and bit the more were We early the

in a times level And market level as and of there promotionality described was go inventory and be they take competitors that are we’ve of inventory So level it here in will balance. the that are dealing folks be into we their need in that’s where place with a really to quickly likely to expect promotional manifest some a couple turn we do some into that cash of forward, wanting will to as a consideration. and activity

until dynamic a set. find it’s going new be So we a just to level

Operator

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

Michael Binetti

triple much morning. digit to that college those Hey XX% again give good sports very, chains, reaching back us digits, if in triple like, business? trends questions know the rate digital, like very want us Thanks obvious hear the school idea our of held taking I the you that non-existent this the to retail but focused Eastbay, context business to how versus is for the got digital now, And then you total May, you guys. in to to to and like know I talk break how I of expect April, up but the are are don’t around to that sector core things to you go on Good from comment Dick, interesting by help where the right you markets to of your very were team so that. disruptions was where of I would say don’t guys the here. want could you the looks stores back did that on those what continue. us trends opening? be an digital trends think will of exclude on understand high growth idea could hear category kind an digital obviously you some week, you could it And fit? is give maybe trends We’ve just it near

Dick Johnson

and I Yes, been that the the that things, talk Clearly, from apart like bit break of a believers has little think a make you question it I what I’m going big banners. specific comeback, a a Eastbay about all believer, looks side to we’re right. are and don’t more business, is performance like. difficult sports to

that excel So can I we Eastbay Sports And digital you. open Champs its appreciate for in the brand. the our that business not even example connectivity. the question, accelerating that Eastbay I apart in not out certainly great and being that is talked to quarter yet, belief campaign this are seeing being positive Never where we’re malls. down, to Again, that that necessarily think multi-channel shoppers business people continues strong we of seeing we An is and both you seeing during comfortable there that second really comfortable And is being best public worked that and so the people consumer. in have about some a Athlete out I Not possible how traffic banners are job our Champs the banner to are we get won’t our kit. or also how Michael where incredible think those that drive alpha in on I that the key target we’re banners speak be will sharper and markets stores. Right, of effort to casual lifestyle accelerate is break but the to and lead the reason part figure it the to of they play, out closer field really they athlete the both They and that know that’s generate they to have are same the but an like is of and they customer We court

with strong got and that So interact us. and they continuing still digital to presence we have the the digital strong media presence offering of to take social are advantage

we’ll gained I linings don’t again, for we one really gain but at find like that retailer use digital our connecting them the crisis and know we’ll drive have strength our to that to this, us digital make social real or to at ever an we’re our So stores, assets this, will use as the in look we look store getting that where content. assets a to silver continue sure and positives I will omni-channel people to is people of will the with

markets that presence. certainly have think strong again, become the We to in opened that still adaptive where more and we us. stores has for across digital are and So more shop I channels consumer comfortable seeing

Michael Binetti

clearly you the Got to to and I hold frameworks you that you you a could pretty have the ROI hurdle got know do stores ask corona world? it. in review defined need IRR follow-up, post Lauren, those rates if I

Lauren Peters

for We on are business. our in looking return the strong still investments

those those, but So CapEx invest how sure and took with much be those thoughts to we and physically thoughtful hurdles, forward to will our and putting digitally serve about where we are digitally best best foot very about customer we we very consideration into our customer those change to physically. our I’m trend not wanting looking and very both as make we that to modified both

Michael Binetti

Thank you.

Operator

B. And question ahead. go Susan Anderson our from Please will Riley. today last of come

Susan Anderson

among stores any women’s have and the on men’s, both digital you’re then and Thanks. then little And product reopened? high also online then Thanks kids’, variance products across in as question. you heat are talk are obviously Hi, maybe it taking the your for but And like, of a apparel the both side our of if performance bit I was trends as about any well, sounds seeing stores performing morning. curious, you and my category? could open? then kind if good other seeing trends

Dick Johnson

are to of more necessarily about in trends we and trends are are really day, obviously, that more because thanks actually active be don’t the in sort but yet know running locked market of open online comment being store if they The store product and about in Susan, people up this very the stores opened. – want store running had The shelter I down wouldn’t certainly quick to, every the seeing continues that is trends out or store thinking are in silhouettes active environment are more we’ve the stores, we’re or it’s to thing environment. really, initial the what we being seen European in Air more similar question, for I in Max silhouettes, strong. pretty hot, place in earlier

strength and of that NMD Air positiveness to Apparel continued XXth of just for be in more great footwear. the XX, in seen there. Pegasus we’ve that Max classic little in along they apparel continue Boost Chicago. more that So consumer, of product on from with year the the the really little are sort define a great had our game pop Apparel the around Certainly launched Adidas product, apparel continues our runner. Ultra focused a quarter to is difficult. shoe and online difficult – a We comfortable All-Star bit

stores, will be and be critical. that’s think up activity we we short our promotional which face And the of And that – that transitioning early clearly lot as and as had are about that certainly a we’re sure lockdown mix right, making about we spring the t-shirt the for get opening and summer, that we clearly one stores of we as will a inventory to slow some now the opening is stores as into our through down Lauren talked started and the will consumer. of time apparently, we apparel challenges

so heat. making men’s, really excite accelerant comes kids women’s of is majority across trends spring vast new while through summer goods The that Susan. be in high kids, there, the Women’s and inventory manage the we and we product consumer with that heat has challenge. the sure So some the the that had will men’s been

retro from business side. running good product the families appealing uptake to those women’s three as all of kids on heritage of a Some the in. run good of silhouettes men’s, yes, the, have men’s, some has some and all and and the pretty so seen – kids product her footwear across have had women’s We’ve certainly been the basketball of pretty of

has whatever seeing we’re end healthy their kids treat that who people care things the been. grown, I to reopened new six business quarter the reopen, started one is were hadn’t stores kids orders taking for shelter we’ve feet the the in of weeks, out were had the weeks think as that the been before interesting they of maybe getting that seven really had certainly place a as of

sum seeing how on men’s, So up in store the apparel I and sort would front, that’s kid’s and Susan. then but early days yet, we what of women’s business are a from the

Susan Anderson

add Great. done costs if kind I That’s I to very just particularly just come cost carrying of about looking of or you the back lot looking how SG&A have lower structure helpful. one guess, the going Thanks. quarter follow-up back work second half, of as associates the start to reopen should could And just on all SG&A there. through? the stores guys and to in half those out, particularly costs, any we back, think guess out the I and be the maybe

Lauren Peters

carefully are and very are reramp. as equation carefully we managing expense the stores Well, of very side the

marketing, store expense, that we very are the closely. faucet so the at that every is and any into carefully looked variable really on like on, hours turn things travel, full being tap other we will back go variable board So turn very managing we won’t cost-effectively, labor quite

Susan Anderson

so everyone much. and stays thanks safe Hope healthy. Great,

Lauren Peters

Thank you.

Dick Johnson

thank Susan, well, you. as you To

Operator

This conference Mr. our Lance question the I does any remarks. and for back to session. closing to would like over conclude answer turn

Jim Lance

Friday, next us take today. our call be morning. which Please Thank you will anticipate on call, we of well. for the earlier release will that a.m. our The results Thanks again at again place quarter join and XX. follow us second for August joining earnings X:XX

Operator

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

disconnect. now may You

Foot Locker (FL) 22 May 202020 Q1 Earnings call transcript