Vice President, Investor Relations and Treasurer Foot Locker, Inc. (212)

Transcription

1 N E W S R E L E A S E CONTACT: Peter D. Brown Vice President, Investor Relations and Treasurer Foot Locker, Inc. (212) FOOT LOCKER, INC. REPORTS FOURTH QUARTER AND FULL YEAR RESULTS Adjusted Net Income of $42 Million or $0.28 Per Share for Fourth Quarter Adjusted Net Income of $142 Million or $0.98 Per Share for Full Year Three New Growth Initiatives Planned for 2002 NEW YORK, NY, March 13, 2002 Foot Locker, Inc. (NYSE: Z), the New York-based specialty athletic retailer, today reported financial results for its fourth quarter and full year ended February 2, Fourth Quarter Results Adjusted net income for the Company s fourth quarter ended February 2, 2002, increased to $42 million, or $0.28 per share, compared with $37 million, or $0.26 per share, last year. Last year s fourth quarter included one additional week in line with the National Retail Federation calendar. Excluding last year's additional week, earnings per share increased 47 percent in 2001 from adjusted net income of $27 million, or $0.19 per share in last year s fourth quarter. For the 13-week fourth quarter periods, sales from adjusted operations were $1,155 million this year compared with $1,135 million last year, reflecting a comparable-store increase of 2.1 percent, and adjusted operating profit increased to $89 million in 2001 from $73 million in Last year s additional week contributed an incremental $65 million of sales and $16 million of operating profit. For the fourth quarter of 2001, reported results from continuing operations were essentially the same as adjusted results. For the fourth quarter of 2000, reported sales were $1,256 million, reported operating profit was $98 million and reported income from continuing operations was $42 million, or $0.31 per share. Full Year Results Adjusted net income for the 52-week full year period ended February 2, 2002, increased to $142 million, or $0.98 per share, from $111 million, or $0.80 per share, in the 53-week full year period last year. Sales from adjusted operations rose to $4,325 million compared with $4,217 million, last year, reflecting a comparable-store increase of 4.9 percent. Adjusted operating profit increased 13 percent to $307 million from $272 million in Reported income from continuing operations for the full year was $111 million, or $0.77 per share, compared with $107 million, or $0.77 per share, last year. Reported sales from continuing operations were $4,379 million in 2001 versus $4,356 million in Reported operating profit from continuing operations was $263 million in 2001 compared with $260 million last year. We are proud of our 2001 achievements, including our fourth quarter and full year financial results, stated Mathew D. Serra, Foot Locker Inc. s President and Chief Executive Officer. I am particularly pleased that our Company was able to continue to grow earnings in spite of what has been an extremely challenging environment for retail businesses across the board. In fact, the full year 2001 represents the third year in a row of significant year-over-year adjusted earnings improvements. Several factors contributed to our year-over-year earnings performance, including: Foot Locker, Inc. 112 West 34 th Street, New York, NY 10120

2 Expanded marquee footwear and private-label apparel offerings Higher gross margin rate reflecting improved merchandise purchasing Focused and planned promotional strategy Significantly lower SG&A rate resulting from corporate-wide expense initiatives In addition to our earnings improvement, 2001 was a noteworthy year for us in realizing a number of our key ongoing strategic positioning goals: We completed the dispositions of our non-athletic businesses, changed our name to Foot Locker, Inc. in order to reflect our streamlined business focus, and accelerated our real estate initiatives with 116 new store openings and 193 store remodels or relocations. The Company s financial position remains strong, with debt, net of cash, reduced to $184 million at year-end. Additionally, the Company did not borrow under its $190 million unsecured revolving credit facility during its fourth fiscal quarter. Merchandise inventories remain very current and well positioned to support 2002 sales. During the fourth quarter, the Company opened 54 stores, remodeled/relocated 51 stores and closed 32 athletic stores. At February 2, 2002 the Company operated 3,590 athletic stores in 14 countries in North America, Europe and Australia Outlook Foot Locker, Inc. s focus in 2002 will be a continuation of those strategies that helped drive earnings per share growth this past year and are expected to drive future top-line sales increases. Aggressive store expansion program in Europe Growth of highly profitable direct-to-customer Internet and catalog business Significant productivity improvements at Champs Sports Foot Locker store expansion in urban United States locations In line with these strategies, the Company is planning three new growth initiatives in 2002 to further differentiate its business from the competition. Open 25 new Nike Jordan shops in Foot Locker and Champs Sports stores Expand Footlocker.com Internet presence to Europe Open 3 new Power Stores in New York City Foot Locker, Inc. and Nike are building a stronger strategic partnership by focusing on initiatives to grow highend marquee footwear and apparel sales. Most recently, an agreement was reached to open 25 Nike Jordan shops in the Company s more-important Foot Locker and Champs Sports urban stores. Merchandise selections will be targeted towards the strongest selling basketball footwear and athletic apparel endorsed by Michael Jordan. This initiative is in line with the Company s strategic priority of increasing the productivity of its existing stores. A second 2002 initiative is to expand the Company s Internet presence to Europe with the introduction of a new division, Footlocker.com Europe. The Company rapidly grew its U.S. Internet business from its introduction in 1998 to $100 million in sales in 2001 by leveraging the infrastructure of its Eastbay catalog operation with its market-leading Foot Locker brand name. The Company sees a similar opportunity in Europe and plans to initiate this strategy by utilizing the expertise of its U.S. Footlocker.com management team to assist its Foot Locker Europe operation. This initiative is expected to complement the Company s aggressive store expansion plans in this region.

3 The third exciting initiative is the recent negotiation of three lease agreements to open new power stores in New York City. The Company plans to open one Foot Locker and one Champs Sports store on Times Square and one Champs Sports store on 125 th Street in Manhattan. The addition of these three stores is in line with the Company s strategy of targeting high-trafficked urban locations for new store growth. Our businesses are well positioned to continue our record of producing quarter-over-quarter profit gains and meaningful annual earnings increases during the next several years, commented Mr. Serra. Earnings improvements over the next 12 months are expected to come from a combination of continued productivity gains, and top-line sales growth that is expected to accelerate as we begin to grow our store count. We currently expect our first quarter 2002 earnings per share to approximate $0.25 to $0.27 per share, in line with current analysts estimates. For the full year, we continue to expect to generate 10 percent or higher annual earnings growth, which we will continue to update throughout the year. The Company is hosting a live conference call at 10:00 am (EST) on Wednesday, March 13, This conference call may be accessed live from the Investor Relations section of the Foot Locker, Inc. website at The conference call will be available for webcast replay until 5:00 pm on Friday, March 15, Operating profit reflects income before income taxes, corporate expense and income, and net interest expense. Reported results are presented in accordance with accounting principles generally accepted in the United States of America. Adjusted results are presented to facilitate comparison. Adjusted results are from continuing operations and exclude the operations and disposition of The San Francisco Music Box Company, Burger King franchises, Afterthoughts, Foot Locker Outlets, Going to the Game, Randy River, Foot Locker Japan and the operations of the accelerated store closings for all periods presented. The reported results for all operations and a reconciliation between reported and adjusted results are attached to this press release. Disclosure Regarding Forward-Looking Statements This press release contains forward-looking statements, which reflect management s current views of future events and financial performance. 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, economic conditions worldwide, and the ability of the Company to execute its business plans effectively with regard to each of its business units. 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.

4 FOOT LOCKER, INC. Consolidated Statements of Operations (unaudited) Periods ended February 2, 2002 and February 3, 2001 (In millions, except per share amounts) FOURTH QUARTER Fourth Quarter 2001 Fourth Quarter 2000 Reported Disposed As Reported Disposed As Adjusted Results Operations Adjusted Results Operations 14 Weeks 13 Weeks* Sales $ 1,155 $ - $ 1,155 $ 1,256 $ 56 $ 1,200 $ 1,135 Cost of sales Selling, general and administrative expenses Depreciation and amortization Restructuring charge (income) (2) (2) - - Interest expense, net Other income (1) (1) (1) (1) 1,088-1,088 1, ,140 1,091 Income from continuing operations before Income taxes Income tax expense Income from continuing operations Loss from discontinued operations, net of Income tax benefit (34) (34) - - Loss on disposal of discontinued operations, net of income taxes (6) (6) - (296) (296) - - Net income (loss) $ 36 $ (6) $ 42 $ (288) $ (325) $ 37 $ 27 Diluted EPS: Income from continuing operations $ 0.28 $ - $ 0.28 $ 0.31 $ 0.05 $ 0.26 $ 0.19 Loss from discontinued operations (0.04) (0.04) - (2.37) (2.37) - - Net income (loss) $ 0.24 $ (0.04) $0.28 $ (2.06) $ (2.32) $ 0.26 $ 0.19 Weighted-average diluted shares outstanding FULL YEAR Full Year 2001 Full Year 2000 Reported Disposed As Reported Disposed As Adjusted Results Operations Adjusted Results Operations 53 Weeks 52 Weeks* Sales $ 4,379 $ 54 $ 4,325 $ 4,356 $ 139 $ 4,217 $ 4,152 Cost of sales 3, ,034 3, ,960 2,922 Selling, general and administrative expenses Depreciation and amortization Restructuring charge Interest expense, net Other income (2) (1) (1) (16) 1 (17) (17) 4, ,105 4, ,035 3,986 Income (loss) from continuing operations Before income taxes 175 (45) (6) Income tax expense (benefit) 64 (14) (2) Income (loss) from continuing operations 111 (31) (4) Loss from discontinued operations, net of Income tax benefit (50) (50) - - Loss on disposal of discontinued operations, net of income taxes (19) (19) - (296) (296) - - Cumulative effect of accounting changes, net of income taxes (1) (1) - - Net income (loss) $ 92 $ (50) $ 142 $ (240) $ (351) $ 111 $ 101 Diluted EPS: Income (loss) from continuing operations $ 0.77 $ (0.21) $ 0.98 $ 0.77 $ (0.03) $ 0.80 $ 0.73 Loss from discontinued operations (0.13) (0.13) - (2.49) (2.49) - - Cumulative effect of accounting changes (0.01) (0.01) - - Net income (loss) $ 0.64 $ (0.34) $ 0.98 $ (1.73) $ (2.53) $ 0.80 $ 0.73 Weighted-average diluted shares outstanding * Excluding 53 rd week

5 Assets FOOT LOCKER, INC. Condensed Consolidated Balance Sheets (unaudited) (In millions) February 2, 2002 February 3, 2001 CURRENT ASSETS Cash and cash equivalents $ 215 $ 109 Merchandise inventories Net assets of discontinued operations 4 37 Assets held for disposal Other current assets ,114 1,014 Property and equipment, net Deferred tax assets Other assets $2,290 $2,240 Liabilities and Shareholders Equity CURRENT LIABILITIES Accounts payable $ 272 $ 264 Accrued liabilities Current portion of reserve for restructuring and discontinued operations Current portion of long-term debt and obligations under capital leases Long-term debt and obligations under capital leases Other liabilities SHAREHOLDERS EQUITY 992 1,013 $2,290 $2,240 The Company recorded a minimum pension liability adjustment during the fourth quarter reflecting a decrease in pension plan assets and a lower discount rate utilized to value pension plan liabilities. The effect of this adjustment was a $115 million reduction to shareholders' equity.

6 FOOT LOCKER, INC. Store and Estimated Square Footage As Adjusted (unaudited) (Square footage in thousands) February 2, 2002 February 3, 2001 January 29, 2000 Foot Locker U.S. Number of stores 1,472 1,453 1,469 Gross square footage 6,039 5,926 5,605 Selling square footage 3,442 3,372 3,419 Lady Foot Locker Number of stores Gross square footage 1,416 1,463 1,412 Selling square footage Kids Foot Locker Number of stores Gross square footage Selling square footage Champs Sports Number of stores Gross square footage 3,262 3,370 3,404 Selling square footage 2,280 2,373 2,387 Foot Locker International Number of stores Gross square footage 1,482 1,345 1,253 Selling square footage Total Athletic Group Number of stores 3,590 3,582 3,595 Gross square footage 13,143 13,076 12,616 Selling square footage 7,942 7,914 7,878 -XXX-