NEW YORK, May 24, 2019 /PRNewswire/ -- Foot Locker,
Inc. (NYSE: FL), the New
York-based specialty athletic retailer, reported today
financial results for its first quarter ended May 4, 2019.
First Quarter Results
Net income for the Company's
first quarter of 2019 was $172
million, or $1.52 per share,
compared to net income of $165
million, or $1.38 per share in
the corresponding prior-year period. Excluding charges
recorded in connection with the Company's pension matter, non-GAAP
earnings were $1.53 per share and
$1.45 per share for the first quarter
of 2019 and 2018, respectively. A reconciliation of GAAP to
non-GAAP results is included in the tables below.
First quarter comparable-store sales increased 4.6
percent. Total first quarter sales increased 2.6 percent, to
$2,078 million, compared to sales of
$2,025 million for the corresponding
prior-year period. Excluding the effect of foreign exchange
rate fluctuations, total sales for the first quarter of 2019
increased 4.7 percent. The Company's gross margin rate
increased to 33.2 percent from 32.9 percent a year ago, while the
SG&A expense rate increased to 20.0 percent from 19.0 percent
in the first quarter of 2018, largely reflecting the strategic
investments the Company is making in its digital capabilities and
infrastructure.
"We started the year with great energy, innovative products, and
exciting customer events, leading to solid top-line growth in the
first quarter with strong performance across our regions, banners,
channels, and categories," said Richard
Johnson, President and Chief Executive Officer. "Based on
the momentum we have underway, we feel confident that the updated
strategic imperatives we introduced at our Investor Day in March
position us to deliver on our long-term goals."
"The team did an excellent job positioning the Company to
leverage its mostly fixed occupancy and buyers compensation
expenses during the first quarter," said Lauren Peters, Executive Vice President and
Chief Financial Officer. "To build on this momentum and
create even deeper connections with our customers, we continue
investing in our digital capabilities, store fleet, and
infrastructure, which we believe will deliver returns on both the
top-line and bottom-line, creating shareholder value in the short
and long term."
Financial Outlook
The Company is on track with its
previously stated full-year outlook, including sales, gross margin,
and SG&A; however, earnings per share are now expected to be up
high-single digits based on the share repurchase activity to
date.
Financial Position
As of May 4,
2019, the Company's merchandise inventories were
$1,211 million, 0.1 percent higher
than at the end of the first quarter last year. Using
constant currencies, inventory increased 1.7 percent.
The Company's cash totaled $1,126
million, while the debt on its balance sheet was
$123 million. During the first
quarter of 2019, the Company adopted the new lease accounting
rules. In connection with that adoption, the Company
recognized $3,273 million of lease
obligations and right-of-use assets of $3,004 million, the difference is due primarily
to previously recognized amounts. The Company spent
$1.8 million to repurchase 32,100
shares during the quarter and paid a quarterly dividend of
$0.38 per share, spending
$43 million.
Store Base Update
During the first quarter, the
Company opened 14 new stores, remodeled or relocated 13 stores, and
closed 34 stores. As of May 4,
2019, the Company operated 3,201 stores in 27 countries in
North America, Europe, Asia,
Australia, and New Zealand.
In addition, 119 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, May
24, 2019, to review these results and discuss the outlook
for 2019. This conference call may be accessed live by
dialing 1-800-936-2724 (U.S. and Canada) or + 44 203-107-0289
(International), with the passcode 8189067 or via the Investor
Relations section of the Foot Locker, Inc. website at
http://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 two
hours following the end of the call at 1-855-859-2056 with the
passcode 8189067 (U.S. and Canada)
or +1 404-537-3406 with passcode 8189067 (International) through
June 7, 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
http://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 May 4, 2019 and May 5, 2018
(In millions, except per share amounts)
|
|
|
|
First
Quarter
|
|
|
2019
|
|
2018
|
Sales
|
|
$
|
2,078
|
|
$
|
2,025
|
Cost of
sales
|
|
|
1,389
|
|
|
1,359
|
SG&A
|
|
|
416
|
|
|
385
|
Depreciation and
amortization
|
|
|
44
|
|
|
45
|
Litigation and other
charges
|
|
|
1
|
|
|
12
|
Income from
operations
|
|
|
228
|
|
|
224
|
|
|
|
|
|
|
|
Interest income,
net
|
|
|
(4)
|
|
|
(2)
|
Other
income
|
|
|
(2)
|
|
|
(3)
|
Income before income
taxes
|
|
|
234
|
|
|
229
|
Income tax
expense
|
|
|
62
|
|
|
64
|
Net income
|
|
$
|
172
|
|
$
|
165
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
1.52
|
|
$
|
1.38
|
Weighted-average
diluted shares outstanding
|
|
|
113.1
|
|
|
119.1
|
Non-GAAP Financial Measures
In addition to reporting the Company's financial results in
accordance with generally accepted accounting principles ("GAAP"),
the Company reports certain financial results that differ from what
is reported under GAAP. We have presented certain financial
measures identified as non-GAAP, such as sales changes excluding
foreign currency fluctuations, adjusted income before income taxes,
adjusted net income, and adjusted diluted earnings per share.
We present certain amounts as excluding the effects of foreign
currency fluctuations, which are also considered non-GAAP measures.
Where amounts are expressed as excluding the effects of
foreign currency fluctuations, such changes are determined by
translating all amounts in both years using the prior-year average
foreign exchange rates. Presenting amounts on a constant
currency basis is useful to investors because it enables them to
better understand the changes in our business that are not related
to currency movements.
These non-GAAP measures are presented because we believe they
assist investors in comparing our performance across reporting
periods on a consistent basis by excluding items that we do not
believe are indicative of our core business or affect
comparability. In addition, these non-GAAP measures are
useful in assessing our progress in achieving our long-term
financial objectives.
The various non-GAAP adjustments are summarized in the tables
below. We estimate the tax effect of all non-GAAP adjustments
by applying a marginal tax rate to each of the respective items.
The income tax items represent the discrete amount that affected
the period.
The non-GAAP financial information is provided in addition to,
and not as an alternative to, our reported results prepared in
accordance with GAAP.
Condensed
Consolidated Statements of Operations
(unaudited)
Periods ended May 4, 2019 and May 5, 2018 (In millions,
except per share amounts)
|
|
|
Reconciliation of
GAAP to non-GAAP results:
|
|
|
|
First
Quarter
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
Pre-tax
income:
|
|
|
|
|
|
|
Income before income
taxes
|
|
$
|
234
|
|
$
|
229
|
Pre-tax adjustments
excluded from GAAP:
|
|
|
|
|
|
|
Litigation and other
charges (1)
|
|
|
1
|
|
|
12
|
Adjusted income
before income taxes (non-GAAP)
|
|
$
|
235
|
|
$
|
241
|
|
|
|
|
|
|
|
After-tax
income:
|
|
|
|
|
|
|
Net income
|
|
$
|
172
|
|
$
|
165
|
After-tax adjustments
excluded from GAAP:
|
|
|
|
|
|
|
Litigation charge, net
of income tax benefit of $- and $3 million, respectively
(1)
|
|
|
1
|
|
|
9
|
Adjusted net income
(non-GAAP)
|
|
$
|
173
|
|
$
|
174
|
|
|
|
First
Quarter
|
|
|
2019
|
|
2018
|
Earnings per
share:
|
|
|
|
|
|
|
Diluted
EPS
|
|
$
|
1.52
|
|
$
|
1.38
|
Diluted EPS amounts
excluded from GAAP:
|
|
|
|
|
|
|
Litigation and other
charges (1)
|
|
|
0.01
|
|
|
0.07
|
Adjusted diluted EPS
(non-GAAP)
|
|
$
|
1.53
|
|
$
|
1.45
|
|
|
Notes on Non-GAAP
Adjustments:
|
|
(1) The
Company recorded pre-tax charges of $1 million and $12 million for
the quarters ended May 4, 2019
and May
5, 2018, respectively, related to a pension litigation matter and
the related plan reformation. The
charge
in the current period reflects professional fees in connection with
the plan reformation. The prior
year
charge reflected adjustments to the value of the judgment and
interest that continued to accrue, as
required
by the provisions of the required plan reformation.
|
Condensed
Consolidated Balance Sheets
(unaudited) (In millions)
|
|
|
|
May 4,
|
|
May 5,
|
|
|
2019
|
|
2018
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
1,126
|
|
$
|
1,029
|
Merchandise
inventories
|
|
|
1,211
|
|
|
1,210
|
Other current
assets
|
|
|
251
|
|
|
301
|
|
|
|
2,588
|
|
|
2,540
|
Property and
equipment, net
|
|
|
810
|
|
|
843
|
Operating lease
right-of-use assets
|
|
|
3,004
|
|
|
-
|
Deferred
taxes
|
|
|
89
|
|
|
104
|
Other
assets
|
|
|
412
|
|
|
476
|
|
|
$
|
6,903
|
|
$
|
3,963
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
451
|
|
$
|
344
|
Accrued and other
liabilities
|
|
|
340
|
|
|
309
|
Current portion of
lease obligations
|
|
|
497
|
|
|
-
|
|
|
|
1,288
|
|
|
653
|
Long-term
debt
|
|
|
123
|
|
|
125
|
Long-term lease
obligations
|
|
|
2,776
|
|
|
-
|
Other
liabilities
|
|
|
109
|
|
|
642
|
Total
liabilities
|
|
|
4,296
|
|
|
1,420
|
Total shareholders'
equity
|
|
|
2,607
|
|
|
2,543
|
|
|
$
|
6,903
|
|
$
|
3,963
|
Store Count and
Square Footage
(unaudited)
|
|
Store activity is
as follows:
|
|
|
|
February 3,
|
|
|
|
|
|
May 4,
|
|
Relocations/
|
|
|
2019
|
|
Opened
|
|
Closed
|
|
2019
|
|
Remodels
|
Foot Locker
US
|
|
886
|
|
2
|
|
7
|
|
881
|
|
2
|
Foot Locker
Europe
|
|
642
|
|
1
|
|
9
|
|
634
|
|
3
|
Foot Locker
Canada
|
|
107
|
|
—
|
|
—
|
|
107
|
|
3
|
Foot Locker
Pacific
|
|
94
|
|
—
|
|
2
|
|
92
|
|
1
|
Foot Locker
Asia
|
|
5
|
|
1
|
|
—
|
|
6
|
|
—
|
Kids Foot
Locker
|
|
428
|
|
3
|
|
1
|
|
430
|
|
—
|
Lady Foot
Locker
|
|
57
|
|
—
|
|
3
|
|
54
|
|
—
|
Champs
Sports
|
|
535
|
|
3
|
|
3
|
|
535
|
|
4
|
Footaction
|
|
250
|
|
3
|
|
1
|
|
252
|
|
—
|
Runners
Point
|
|
107
|
|
—
|
|
5
|
|
102
|
|
—
|
Sidestep
|
|
80
|
|
1
|
|
3
|
|
78
|
|
—
|
SIX:02
|
|
30
|
|
—
|
|
—
|
|
30
|
|
—
|
Total
|
|
3,221
|
|
14
|
|
34
|
|
3,201
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
Selling and gross
square footage are as follows:
|
|
|
|
|
|
|
|
|
|
|
February 3,
2019
|
May 4, 2019
|
(in
thousands)
|
|
|
|
Selling
|
|
Gross
|
|
Selling
|
|
Gross
|
Foot Locker
US
|
|
|
|
2,404
|
|
4,184
|
|
2,392
|
|
4,166
|
Foot Locker
Europe
|
|
|
|
1,002
|
|
2,158
|
|
998
|
|
2,150
|
Foot Locker
Canada
|
|
|
|
263
|
|
426
|
|
261
|
|
427
|
Foot Locker
Pacific
|
|
|
|
139
|
|
230
|
|
138
|
|
228
|
Foot Locker
Asia
|
|
|
|
19
|
|
34
|
|
23
|
|
43
|
Kids Foot
Locker
|
|
|
|
738
|
|
1,267
|
|
741
|
|
1,272
|
Lady Foot
Locker
|
|
|
|
79
|
|
133
|
|
75
|
|
126
|
Champs
Sports
|
|
|
|
1,913
|
|
2,974
|
|
1,910
|
|
2,971
|
Footaction
|
|
|
|
799
|
|
1,360
|
|
806
|
|
1,371
|
Runners
Point
|
|
|
|
138
|
|
238
|
|
128
|
|
224
|
Sidestep
|
|
|
|
74
|
|
133
|
|
73
|
|
131
|
SIX:02
|
|
|
|
60
|
|
102
|
|
60
|
|
102
|
Total
|
|
|
|
7,628
|
|
13,239
|
|
7,605
|
|
13,211
|
Contact:
|
James R.
Lance
Vice
President,
Corporate Finance and
Investor Relations
Foot Locker,
Inc.
(212)
720-4600
|
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SOURCE Foot Locker, Inc.