The following excerpt is from the company's SEC filing.
Treasurer and Investor Relations
Foot Locker, Inc.
FOOT LOCKER, INC. REPORTS 2016 THIRD QUARTER RESULTS
GAAP Earnings of $157 Million, $1.17 Per Share
Non-GAAP Earnings Per Share Increased 13 Percent to $1.13
Comparable-Store Sales Increased 4.7 Percent
NEW YORK, NY, November 18, 2016 – Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, today reported financial results for its third quarter ended October 29, 2016.
Third Quarter Results
Net income for the Company’s third quarter ended October 29, 2016 was $157 m illion, or $1.17 per share, compared with net income of $80 million, or $0.57 per share in the same period of 2015.
Third quarter comparable-store sales increased 4.7 percent. Total sales increased 5.1 percent, to $1,886 million this year, compared with sales of $1,794 million for the corresponding prior-year period. Excluding the effect of foreign currency fluctuations, total sales for the third quarter increased 5.5 percent. The Company’s gross margin rate improved to 33.9 percent of sales from 33.8 percent a year ago, and the selling, general, and administrative expense rate improved 20 basis points to 19.4 percent of sales.
During the third quarter, the Company performed a scheduled reassessment of the value of intellectual property provided to its European business by Foot Locker in the U.S. Driven by the recent success of the Foot Locker business in Europe, the new, higher valuation resulted in increased deductions that reduced tax expense by $10 million, adding seven cents per share to third quarter earnings. In addition, the Company recorded a pre-tax impairment charge of $6 million related to certain store assets of Runners Point and Sidestep, reducing earnings per share by three cents. Excluding these events, as well as the $100 million pension litigation charge the Company recorded in the third quarter of 2015, the Company earned $1.13 per share this year on a non-GAAP basis, a 13 percent increase over the non-GAAP earnings of $1.00 per share in the comparable 13-week period in 2015. A reconciliation of GAAP to non-GAAP results is included in the tables below.
“Our outstanding track record of meaningful sales and profit growth over several years is a strong testament to Foot Locker, Inc.’s solid position at the center of sneaker culture,” said Richard Johnson, Chairman of the Board and Chief Executive Officer. “Our associates work hard every day to make our Company the sneaker lover’s preferred destination for the best footwear and apparel assortments across our array of outstanding athletic vendors. That work translated once again into an exceptional quarterly sales and profit performance.”
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Lauren Peters, Executive Vice President and Chief Financial Officer, added, “The Company continued to execute its strategic initiatives and produce excellent financial results in the quarter, with solid, consistent top-line growth, as well as incremental improvements in both gross margin and SG&A rates. Our inventory is fresh and well-positioned as we prepare for the important holiday selling season, and we remain well on track to achieve our annual guidance of a mid-single digit comparable-store sales gain and double-digit earnings per share growth.”
Net income for the Company’s first nine months of the year increased to $475 million, or $3.50 per share, compared to net income of $383 million, or $2.71 per share, for the corresponding period in 2015. Excluding the tax effect of the intellectual property reassessment and the impairment charge noted above, earnings per share for the first nine months totaled $3.46, a 10 percent increase over the same period last year excluding the pension litigation expense.
Year-to-date sales were $5,653 million, an increase of 4.6 percent compared to sales of $5,405 million in the corresponding nine-month period of 2015. Year-to-date comparable store sales have increased 4.0 percent. Excluding the effect of foreign currency fluctuations, total sales year-to-date have increased 4.9 percent.
At October 29, 2016, the Company’s merchandise inventories were $1,361 million, 1.9 percent higher than at the end of the third quarter last year. Using constant currencies, inventory increased 2.2 percent.
The Company’s cash totaled $865 million, while the debt on its balance sheet was $128 million. The Company spent $76.3 million to repurchase 1.15 million shares during the quarter and paid a quarterly dividend of $0.275. Year-to-date, the Company has invested $193 million in its store fleet, its websites, and infrastructure, tracking to approximately $290 million for the full year. The Company has also returned $463 million to shareholders between its stock repurchase program and dividends, spending $352 million to repurchase 5.9 million shares, and paying $111 million in dividends.
Store Base Update
During the third quarter, the Company opened 21 new stores, remodeled or relocated 40 stores, and closed 28 stores. As of October 29, 2016, the Company operated 3,394 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, 56 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 15 franchised Runners Point stores in Germany.
The Company is hosting a live conference call at 9:00 a.m. (EST) today, November 18, 2016, to review these results, provide comments on the status of its current initiatives, and discuss trends in its business and the athletic industry. This conference call may be accessed live by dialing 1-800-941-7616 (U.S. and Canada) or +44 208-196-2142 (International), or via the Investor Relations section of the Foot Locker, Inc. website at
Please log on to the website 15 minutes prior to the call in order to download any necessary software. A replay of the call will be available via webcast from the same Investor Relations section of the Foot Locker, Inc. website at
through December 2, 2016.
Disclosure Regarding Forward-Looking Statements
This report contains forward-looking statements within the meaning of the federal securities laws. Other than statements of historical facts, all statements which address activities, events, or developments that the Company anticipates will or may occur in the future, including, but not limited to, such things as future capital expenditures, expansion, strategic plans, financial objectives, dividend payments, stock repurchases, growth of the Company’s business and operations, including future cash flows, revenues, and earnings, and other such matters, are forward-looking statements. These forward-looking statements are based on many assumptions and factors which are detailed in the Company’s filings with the Securities and Exchange Commission, including the effects of currency fluctuations, customer demand, fashion trends, competitive market forces, uncertainties related to the effect of competitive products and pricing, customer acceptance of the Company’s merchandise mix and retail locations, the Company’s reliance on a few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor), cybersecurity breaches, pandemics and similar major health concerns, unseasonable weather, deterioration of global financial markets, economic conditions worldwide, deterioration of business and economic conditions, any changes in business, political and economic conditions due to the threat of future terrorist activities in the United States or in other parts of the world and related U.S. military action overseas, the ability of the Company to execute its business and strategic plans effectively with regard to each of its business units, and risks associated with global product sourcing, including political instability, changes in import regulations, and disruptions to transportation services and distribution. For additional discussion on risks and uncertainties that may affect forward-looking statements, see “Risk Factors” disclosed in the 2015 Annual Report on Form 10-K. Any changes in such assumptions or factors could produce significantly different results. The Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise.
Condensed Consolidated Statements of Operations
Periods ended October 29, 2016 and October 31, 2015
(In millions, except per share amounts)
Cost of sales
Depreciation and amortization
Impairment and litigation charges
Interest expense, net
Income before taxes
Income tax expense
Weighted-average diluted shares outstanding
Reconciliation of GAAP to Non-GAAP results
GAAP net income
Tax benefit related to intellectual
Footnotes to explain adjustments
In the third quarter of 2016, the Company recorded a $6 million impairment charge ($5 million after tax) associated with underperforming store assets of Runners Point and Sidestep.
In the third quarter of 2015, the Company recorded a $100 million pension litigation charge ($61 million after tax.) The matter remains under appeal, and there is no assurance that the ultimate resolution will not differ from the amount currently accrued by the Company.
During the third quarter of 2016, the Company’s scheduled triennial reassessment of the value of the intellectual property provided to our European business by Foot Locker in the U.S. resulted in a $10 million tax reduction.
The Company presents non-GAAP financial information because it believes the information assists investors in comparing our performance across reporting periods on a consistent basis by excluding items that are not indicative of its core business. The non-GAAP financial information is provided in addition to, and not as an alternative to, the Company’s reported results prepared in accordance with GAAP.
Condensed Consolidated Balance Sheets
Cash and cash equivalents
Other current assets
Property and equipment, net
Deferred tax assets
Liabilities and Shareholders’ Equity
Accrued and other liabilities
Current portion of capital lease obligations
Long-term debt and obligations under capital leases
Store and Square Footage
Store activity is as follows:
Foot Locker US
Foot Locker Europe
Foot Locker Canada
Foot Locker Asia Pacific
Lady Foot Locker
Kids Foot Locker
Selling and gross square footage are as follows:
January 30, 2016
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The above information was disclosed in a filing to the SEC. To see the filing, click here.
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