Foot Locker reaffirms FY08 EPS outlook
May 23, 2008 - United States Of America
Foot Locker Inc the New York-based specialty athletic retailer, reported financial results for its first quarter ended May 3, 2008.
Net income for the Company's first quarter ended May 3, 2008 was $3 million, or $0.02 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 comparative purposes, first quarter net income in 2008, before the store closing expenses and impairment charge, was $21 million, or $0.14 per share. In the first quarter of 2007, the Company reported net income of $17 million, or $0.11 per share.
Store closing expenses primarily reflect negotiated landlord settlements associated with exiting 15 stores prior to lease expirations in line with a program initiated by the Company in 2007.
The impairment charge recognized during the first quarter relates to a note receivable due from the purchaser of the Company's former Northern Group operation in Canada - a business that the Company sold in 2001.
First quarter sales decreased 0.5 percent to $1,309 million, as compared with sales of $1,316 million for the corresponding prior year period.
Excluding the effect of foreign currency fluctuations, total sales for the first quarter decreased 3.7 percent. First quarter comparable-store sales decreased 2.9 percent.
"Although the external environment remained challenging, our first quarter net income, excluding the impairment charge, was in line with our expectations going into the quarter," stated Matthew D. Serra, Foot Locker Inc.'s Chairman and Chief Executive Officer.
"The inventory initiatives that we undertook last year helped position our Company for an improved gross margin rate for this year.
Additionally, our first quarter profit was enhanced by lower depreciation expense than last year and expense containment initiatives. We continue to expect our net income for the full year, excluding the impairment charge, to be in a range of $0.65 to $0.85 per share."
At the end of the first quarter, the Company's cash position, net of debt, was $283 million, a $100 million improvement from the same time last year.
Subsequent to the end of the first quarter, the Company completed a new, 3-year, $175 million revolving credit facility with its banks. Concurrently, the Company repaid the $88 million balance that was outstanding on its term loan which was scheduled to mature in May 2009.
Mr. Serra continued, "In line with a strategic initiative, we decreased our merchandise inventory by $99 million versus the first quarter of last year, which was the primary factor that contributed to the increase in our net cash position.
With the recent completion of a new credit facility and repayment of debt, we have strengthened further our financial foundation.
At closing of the facility, our cash and short-term investment position, and availability under our new revolving credit facility totaled nearly $600 million, while our debt was reduced to $129 million."
Store Base Update:
During the first quarter, the Company opened 33 new stores; remodeled/relocated 73 stores and closed 60 stores. At May 3, 2008, the Company operated 3,758 stores in 21 countries in North America, Europe and Australia. In addition, 13 Foot Locker franchised stores were operating in the Middle East and South Korea.
The Company is hosting a live conference call at 9:00 a.m. (ET) on Friday, May 23, 2008 to discuss these results and provide guidance with regard to its earnings outlook for 2008.