Foot Locker, Inc. Reports First Quarter Financial Results

NEW YORK, May 23 /PRNewswire-FirstCall/ -- Foot Locker, Inc. , the New York-based specialty athletic retailer, today reported financial results for its first quarter ended May 5, 2007.

Financial Results

Net income for the Company's first quarter ended May 5, 2007 was $17 million, or $0.11 per share, as compared with $59 million, or $0.38 per share, last year. Last year's results benefited by $1 million, or $0.01 per share, from a cumulative effect of accounting change related to the Company's required adoption of SFAS 123(R).

First quarter sales decreased 3.6 percent to $1,316 million, as compared with sales of $1,365 million for the corresponding prior year period. Excluding the effect of foreign currency fluctuations, total sales for the 13- week period decreased 5.3 percent. First quarter comparable-store sales decreased 5.1 percent.

"Our first quarter financial results reflected a weak performance in each of our U.S. businesses partially offset by a solid profit increase at our international operations," stated Matthew D. Serra, Foot Locker, Inc.'s Chairman and Chief Executive Officer. "Because of the disappointing sales at our U.S. stores, we increased our promotional posture to help clear older goods and reduce inventory levels. As a result, our gross margin in our U.S. store businesses fell significantly short of our plan."

Mr. Serra continued, "While we are seeing signs of improvement in our U.S. store businesses, we believe it is prudent to more-conservatively plan our business for the balance of 2007. Therefore, for our second fiscal quarter, we currently expect earnings to be in the range of $0.15 to $0.20 per share. This forecast includes higher markdowns than last year to ensure that our inventory is well-positioned for the fall season. We currently expect that our earnings for the full year will be in the range of $1.15 to $1.25 per share."

Store Base Update

During the first quarter, the Company opened 61 new stores; remodeled/relocated 65 stores and closed 73 stores. At May 5, 2007, the Company operated 3,930 stores in 20 countries in North America, Europe and Australia. The store openings include 31 new Footquarters stores, the Company's new value-based footwear chain. In addition, three additional Foot Locker franchised stores were operating in the Middle East.

Financial Position

The Company continued to strengthen its financial position while also redeploying its strong cash flow with a goal of enhancing shareholder value. At the end of the first quarter, the Company's cash position, net of debt, was $183 million, an $85 million improvement from the same time last year. The Company's cash and short-term investments totaled $418 million, while its total debt was $235 million. During the first quarter, the Company paid out $19 million in shareholder dividends and repurchased 1.2 million shares of its common stock for $26 million.

The Company is hosting a live conference call at 10:00 a.m. (EDT) on Thursday, May 24, 2007 to discuss these results and provide guidance with regard to its earnings outlook for 2007. This conference call may be accessed live from the Investor Relations section of the Foot Locker, Inc. website at http://www.footlocker-inc.com/. The conference call will be available for webcast replay until 5:00 p.m. on Thursday, May 31, 2007.

Disclosure Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, such things as future capital expenditures, expansion, strategic plans, 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 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), unseasonable weather, economic conditions worldwide, 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 plans effectively with regard to each of its business units, risks associated with foreign global sourcing, including political instability, changes in import regulations, and disruptions to transportation services and distribution. 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.

FOOT LOCKER, INC. Condensed Consolidated Statements of Operations (unaudited) Periods ended May 5, 2007 and April 29, 2006 (In millions, except per share amounts) First First Quarter Quarter 2007 2006 Sales $ 1,316 $ 1,365 Cost of sales 956 946 Selling, general and administrative expenses 290 283 Depreciation and amortization 43 43 Interest expense, net --- 1 1,289 1,273 Income before income taxes and cumulative effect of accounting change 27 92 Income tax expense 10 34 Income before cumulative effect of accounting change 17 58 Cumulative effect of accounting change, net of income tax --- 1 Net income $ 17 $ 59 Diluted EPS: Income before cumulative effect of accounting change $ 0.11 $ 0.37 Cumulative effect of accounting change --- 0.01 Net income $ 0.11 $ 0.38 Weighted-average diluted shares outstanding 156.5 156.7 FOOT LOCKER, INC. Condensed Consolidated Balance Sheets (unaudited) (In millions) May 5, 2007 April 29, 2006 Assets CURRENT ASSETS Cash, cash equivalents and short-term investments $ 418 $ 370 Merchandise inventories 1,490 1,403 Other current assets 265 172 2,173 1,945 Property and equipment, net 659 674 Deferred tax assets 118 159 Other assets 455 472 $ 3,405 $ 3,250 Liabilities and Shareholders' Equity CURRENT LIABILITIES Accounts payable $ 403 $ 380 Accrued and other liabilities 252 226 655 606 Long-term debt and obligations under capital leases 221 272 Other liabilities 234 301 SHAREHOLDERS' EQUITY 2,295 2,071 $ 3,397 $ 3,250 FOOT LOCKER, INC. Store and Estimated Square Footage (unaudited) (Square footage in thousands) May 5, April 29, April 30, 2007 2006 2005 Foot Locker U.S. Number of stores 1,332 1,365 1,403 Gross square footage 5,391 5,498 5,705 Selling square footage 3,179 3,251 3,337 Footaction Number of stores 375 365 350 Gross square footage 1,748 1,721 1,685 Selling square footage 1,076 1,063 1,049 Lady Foot Locker Number of stores 553 546 555 Gross square footage 1,234 1,220 1,242 Selling square footage 697 685 696 Kids Foot Locker Number of stores 332 320 336 Gross square footage 800 777 812 Selling square footage 479 465 484 Champs Sports Number of stores 574 555 566 Gross square footage 3,127 3,037 3,149 Selling square footage 2,134 2,090 2,160 Footquarters Number of stores 31 --- --- Gross square footage 182 --- --- Selling square footage 164 --- --- Foot Locker International Number of stores 733 726 718 Gross square footage 2,125 2,081 2,058 Selling square footage 1,090 1,083 1,094 Total Stores Operated Number of stores 3,930 3,877 3,928 Gross square footage 14,607 14,334 14,651 Selling square footage 8,819 8,637 8,820 Total Franchised Stores Number of stores 6 --- --- Gross square footage 18 --- --- Selling square footage 12 --- ---