Market Overview

Foot Locker, Inc. Reports 2019 Second Quarter Results

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NEW YORK, Aug. 23, 2019 /PRNewswire/ -- Foot Locker, Inc. (NYSE:FL), the New York-based specialty athletic retailer, reported today financial results for its second quarter ended August 3, 2019.

Second Quarter Results
Net income for the Company's second quarter of 2019 was $60 million, or $0.55 per share, compared to net income of $88 million, or $0.75 per share in the corresponding prior-year period.  Included in these results are: 1) a $13 million charge related to the lease termination costs incurred in connection with the closure of certain SIX:02 locations, 2) a $1 million charge recorded in connection with the Company's pension matter, and 3) a $2 million tax charge in connection with U.S. tax reform.  Excluding these items, non-GAAP earnings were $0.66 per share and $0.75 per share for the second quarter of 2019 and 2018, respectively.  A reconciliation of GAAP to non-GAAP results is included in the tables below.

Second quarter comparable-store sales increased 0.8 percent.  Total second quarter sales decreased 0.4 percent, to $1,774 million, compared to sales of $1,782 million for the corresponding prior-year period.  Excluding the effect of foreign exchange rate fluctuations, total sales for the second quarter of 2019 increased 0.8 percent.  The Company's gross margin rate decreased to 30.1 percent from 30.2 percent a year ago. SG&A expense rate increased to 22.2 percent from 21.3 percent in the second quarter of 2019, largely reflecting the ongoing investments the Company is making in its digital capabilities and infrastructure.

"While our results in the second quarter did come in at the low end of our expectations, we saw improvement in our performance as we moved through each month of the quarter," said Richard Johnson, President and Chief Executive Officer. "We remain deeply connected with sneaker and youth culture, and believe this positive momentum exiting the quarter has us well positioned for the back-to-school period and beyond.  Further, our team continues to make meaningful progress against our long-term strategic imperatives."

Year-To-Date Results
Net income for the Company's first six months of the year decreased to $232 million, or $2.08 per share on a GAAP basis, compared to net income of $253 million, or $2.14 per share, for the corresponding period in 2018.  On a non-GAAP basis, earnings per share for the six-month period totaled $2.20, compared to $2.21 per share earned in the same period in 2018.  Year-to-date sales were $3,852 million, an increase of 1.2 percent compared to sales of $3,807 million in the corresponding six-month period of 2018.  Year-to-date, comparable store sales increased 2.8 percent, while total year-to-date sales, excluding the effect of foreign currency fluctuations, increased by 2.9 percent.

Financial Position
As of August 3, 2019, the Company's merchandise inventories were $1,227 million, 2.2 percent lower than at the end of the second quarter last year.  Using constant currencies, inventory decreased 1.0 percent. 

The Company's cash totaled $939 million, while the debt on its balance sheet was $123 million.  The Company repurchased 2.9 million shares for $120 million during the quarter and paid a quarterly dividend of $0.38 per share, for a total of $41 million.

"In addition to making meaningful investments in our stores and digital capabilities during the quarter, we maintained our disciplined approach to inventory management and are set-up to continue flowing fresh, exciting product offerings for the back-half of 2019," said Lauren Peters, Executive Vice President and Chief Financial Officer.  "We remain optimistic that we can deliver a mid-single digit comparable sales gain for the full year and high-single digit adjusted EPS growth."

Store Base Update
During the second quarter, the Company opened 10 new stores, remodeled or relocated 35 stores, and closed 37 stores.  As of August 3, 2019, the Company operated 3,174 stores in 27 countries in North America, Europe, Asia, Australia, and New Zealand.  In addition, 123 franchised Foot Locker stores were operating in the Middle East, as well as 10 franchised Runners Point stores in Germany.

The Company is hosting a live conference call at 9:00 a.m. (ET) today, August 23, 2019, to review these results and discuss the outlook for 2019.  This conference call may be accessed live by calling toll free 1-844-701-1163 or international toll 1-412-317-5490 or via the Investor Relations section of the Foot Locker, Inc. website at https://www.footlocker-inc.com.  Please log on to the website 15 minutes prior to the call in order to register.  An archived replay of the conference call can be accessed approximately one hour following the end of the call at 1-877-344-7529 in the U.S., 1-855-669-9658 in Canada, or 1-412-317-0088 internationally with passcode 10133597 through September 6, 2019.  A replay of the call will be also be available via webcast from the same Investor Relations section of the Foot Locker, Inc. website at https://www.footlocker-inc.com.

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 U.S. Securities and Exchange Commission.

These forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control. For additional discussion on risks and uncertainties that may affect forward-looking statements, see "Risk Factors" disclosed in the 2018 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

(unaudited)

 

Periods ended August 3, 2019 and August 4, 2018
(In millions, except per share amounts) 






Second Quarter



Second Quarter
Year-to-Date





2019



2018



2019



2018

Sales 



$

1,774


$

1,782


$

3,852


$

3,807















Cost of sales




1,240



1,243



2,629



2,602

SG&A




393



380



809



765

Depreciation and amortization




46



44



90



89

Litigation and other charges




14



3



15



15

Income from operations




81



112



309



336















Interest income, net




2

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