Foot Locker Q2 sales up 1.5%

08 Sep '08

3 min read

Foot Locker Inc, the New York-based specialty athletic retailer, reported financial results for its second quarter ended August 2, 2008.

Second Quarter Results:
The Company reported net income of $18 million, or $0.11 per share, for the second quarter ended August 2, 2008 compared with a net loss of $18 million, or $0.12 per share, last year. Second quarter sales increased 1.5 percent, to $1,302 million this year compared with sales of $1,283 million for the corresponding prior year period. Second quarter comparable-store sales decreased 0.5 percent.

“Our second quarter earnings were at the high end of our expectations due primarily to lower than anticipated markdowns. As a result, our gross margin rate was 420 basis points favorable to the second quarter of last year and in line with our historic gross margin rates for the second fiscal quarter,” stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. “Our gross margin rate in the second quarter of last year was affected negatively by a strategic decision to accelerate the clearance of slow-selling merchandise.”

Year-to-Date Results:
Net income for the Company's first six months of the year was $21 million, or $0.13 per share, and includes store closing expenses of $3 million, after-tax, or $0.02 per share, and a non-cash impairment charge of $15 million, after-tax, or $0.10 per share. For comparison purposes, year-to-date net income in 2008, before the store closing expenses and impairment charge, was $39 million, or $0.25 per share. For the first six months of 2007, the Company had a net loss of $1 million, or $0.01 per share.

Year-to-date sales increased 0.5 percent to $2,611 million compared with sales of $2,599 million last year. Comparable-store sales decreased 1.7 percent.

Financial Position:
At August 2, 2008, the Company's cash and short-term investments totaled $431 million while the debt on its balance sheet was $125 million. The Company's cash position, net of debt, was $173 million higher than the same time last year. During the second quarter the Company repaid the remaining $88 million of its bank term debt in advance of final maturity.

In line with a strategic initiative designed to improve inventory management, the Company's merchandise inventory at the end of the second quarter was 3.5 percent lower than at the end of the second quarter last year. On a constant currency basis, merchandise inventory was 5.4 percent below last year. At the Company's combined U.S. store businesses, merchandise inventory has been reduced by approximately 10 percent versus the level two years ago.

Store Base Update:
During the first six months of the year, the Company opened 40 new stores, remodeled/relocated 162 stores and closed 97 stores. At August 2, 2008, the Company operated 3,728 stores in 21 countries in North America, Europe and Australia. In addition, 14 franchised stores were operating in the Middle East and South Korea.

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