Foot Locker Inc. (FL) filed Quarterly Report for the period ended 2009-08-01.
Foot Locker Inc. is a leading global retailer operating primarily mall-based stores in North America Europe Asia and Australia. The company operates in two business segments the Global Athletic Group and the Northern Group. The Global Athletic Group operates the following retail stores: Foot Locker Lady Foot Locker Kids Foot Locker Champs Sports Footlocker.com. The Northern Group consists of four apparel formats:Northern Reflections Northern Traditions Northern Getaway and NorthernElements. Foot Locker Inc. has a market cap of $1.67 billion; its shares were traded at around $10.75 with a P/E ratio of 17.3 and P/S ratio of 0.3. The dividend yield of Foot Locker Inc. stocks is 5.6%. Foot Locker Inc. had an annual average earning growth of 18.8% over the past 10 years.
Highlight of Business Operations:
Selling, general and administrative expenses (“SG&A”) of $252 million decreased by $47 million, or 15.7 percent, for the thirteen weeks ended August 1, 2009 as compared with the corresponding prior-year period. SG&A of $530 million decreased by $68 million, or 11.4 percent, for the twenty-six weeks ended August 1, 2009 as compared with the corresponding prior-year period. SG&A, as a percentage of sales, decreased to 22.9 percent for the thirteen weeks ended August 1, 2009 as compared with 23.0 percent in the corresponding prior-year period. SG&A, as a percentage of sales, was 22.9 percent for both the twenty-six weeks ended August 1, 2009 and August 2, 2008. Excluding the effect of foreign currency fluctuations, SG&A decreased $37 million and $44 million for the thirteen and twenty-six weeks ended August 1, 2009, respectively, as compared with the corresponding prior-year periods. The decrease in the thirteen and twenty-six weeks ended August 1, 2009 primarily reflects reduced store costs and lower corporate expense offset, in part, by an increase in pension expense as compared with the corresponding prior-year periods. The decrease in store costs principally reflects reduced store variable costs, primarily wages, related to operating fewer stores and better expense management. Pension expense increased by $3 million and $7 million for the thirteen and twenty-six weeks ended August 1, 2009, respectively. The inclusion of CCS, which was acquired during the fourth quarter of 2008, did not significantly affect SG&A.
Depreciation and amortization decreased by $5 million in the second quarter of 2009 to $28 million as compared with $33 million for the second quarter of 2008. Depreciation and amortization decreased by $9 million for the twenty-six weeks ended August 1, 2009 to $56 million as compared with $65 million for the twenty-six weeks ended August 2, 2008. Excluding the effect of foreign currency fluctuations, primarily related to the euro, depreciation and amortization decreased by $3 million and $6 million for the thirteen and twenty-six weeks ended August 1, 2009, respectively, as compared with the corresponding prior-year periods. The decrease for the quarter and the year-to-date periods primarily reflects reduced depreciation and amortization of approximately $4 million and $8 million, respectively, associated with the impairment charges recorded during the fourth quarter of 2008, offset by the effect of prior-year capital spending and the amortization expense associated with the CCS customer list intangible asset.
For the thirteen weeks ended August 1, 2009, net income decreased by $18 million, or $0.11 per diluted share as compared with the thirteen weeks ended August 2, 2008. Net income for the twenty-six weeks ended August 1, 2009 was $31 million, or $0.20 per diluted share. This compares to net income of $21 million, or $0.13 per diluted share for the twenty-six weeks ended August 2, 2008. Included in the thirteen weeks ended August 1, 2009, is income from discontinued operations of $1 million, as a result of a favorable state tax examination attributable to the Company s former Canadian businesses. Included in the twenty-six weeks ended August 2, 2008 are charges totaling $20 million (pre-tax), or $0.12 per share, representing an impairment charge of $15 million related to the Northern Group note receivable and expenses of $5 million related to the store closing program.
Net cash provided by operating activities was $83 million and $159 million for the twenty-six weeks ended August 1, 2009 and August 2, 2008, respectively. These amounts reflect net income adjusted for non-cash items and working capital changes. The non-cash charge for the twenty-six weeks ended August 2, 2008 represents a $15 million impairment charge related to the Northern Group note receivable. The change in merchandise inventories represents the normal seasonal increase related to the back-to-school selling season. The change in other accruals primarily represents incentive compensation payments. During the twenty-six weeks ended August 1, 2009, the Company terminated its interest rate swaps for a gain of $19 million. Additionally, during the twenty-six weeks ended August 1, 2009, the Company contributed $11 million to its U.S. and Canadian qualified pension plans as compared with a $6 million contribution to the Canadian qualified pension plan in the corresponding prior-year period. Due to the negative pension asset performance experienced in 2008, the Company made an additional contribution of $29 million during August 2009 to its U.S. qualified pension plan. No further pension contributions are planned for the balance of the year.
Net cash used in investing activities was $36 million and $77 million for the twenty-six weeks ended August 1, 2009 and August 2, 2008, respectively. Included in investing activities for the twenty-six weeks ended August 1, 2009 is a $1 million gain from insurance recoveries. Additionally, during the second quarter of 2009, the Company received $10 million, representing further liquidation of the Reserve International Liquidity Fund. The remaining investment of $13 million is classified as a short-term investment in the Condensed Consolidated Balance Sheet at August 1, 2009. Capital expenditures were $47 million for the twenty-six weeks ended August 1, 2009 as compared with $79 million in the corresponding prior-year period reflecting the Company s strategic decision to reduce its capital plan for 2009 due to the uncertain external environment. Capital expenditures for the full-year of 2009 are expected to total approximately $103 million, of which $79 million relates to modernizations of existing stores and new store openings, and $24 million reflects the development of information systems and other support facilities. The Company has the ability to revise and reschedule the anticipated capital expenditure program should the Company s financial position require it.
Net cash used in financing activities was $49 million and $139 million for the twenty-six weeks ended August 1, 2009 and August 2, 2008, respectively. During the twenty-six weeks ended August 1, 2009 and August 2, 2008, the Company purchased and retired $3 million and $6 million, respectively, of its 8.50 percent debentures payable in 2022. Additionally, during the twenty-six weeks ended August 2, 2008 the Company made payments of $88 million, which fully repaid its 5-year term loan. The Company declared and paid dividends totaling $47 million for both the twenty-six weeks ended August 1, 2009 and August 2, 2008, representing a rate of $0.15 per share. The Company received proceeds from the issuance of common stock in connection with employee stock programs of $1 million and $2 million for the twenty-six weeks ended August 1, 2009 and August 2, 2008, respectively.
FL is in the portfolios of Robert Rodriguez of FPA Capital.
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