Foot Locker, Inc. Reports 2018 Third Quarter Results

NEW YORK, Nov. 20, 2018 /PRNewswire/ -- Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, reported today financial results for its third quarter ended November 3, 2018.

Third Quarter Results
Net income for the Company's third quarter ended November 3, 2018 was $130 million, or $1.14 per share, compared to net income of $102 million, or $0.81 per share in the same period of fiscal 2017.

This result included a $2 million million pre-tax charge related to the Company's previously-disclosed pension litigation judgment, offset by $23 million of tax benefits related to last year's tax reform bill for 1) a decrease to the tax on the deemed repatriation of foreign earnings, and 2) a decrease to tax expense for IRS accounting method changes and timing difference true-ups.  Excluding these items, which increased after-tax earnings by 19 cents per share, non-GAAP earnings were $0.95 per share, a 9 percent increase over the non-GAAP earnings of $0.87 per share in the comparable 13-week period in 2017.  A reconciliation of GAAP to non-GAAP results is included in the tables below.

Third quarter comparable store sales increased 2.9 percent.  Total third quarter sales decreased 0.5 percent, to $1,860 million this year, compared to sales of $1,870 million for the corresponding prior-year period.  Excluding the effect of foreign exchange rate fluctuations, total sales for the third quarter increased 0.4 percent.  Additionally, the 53^rd week shift impact reduced sales by approximately $60 million during the third quarter.

The Company's gross margin rate increased to 31.6 percent from 31.0 percent a year ago, while the SG&A expense rate increased to 21.4 percent from 19.7 percent in the third quarter of 2017.

"Our accelerating comparable sales and improving bottom line reflect the strategic partnerships with our vendors, as well as our efforts to inspire and empower youth culture and create deeper connections with local communities," said Richard Johnson, Chairman and Chief Executive Officer.  "We believe we are well positioned to produce even stronger results in the all-important holiday selling season and the fourth quarter overall."

Year-To-Date Results
Net income for the Company's first nine months of the year increased to $383 million, or $3.28 per share on a GAAP basis, compared to net income of $333 million, or $2.55 per share, for the corresponding period in 2017.  On a non-GAAP basis, earnings per share for the nine-month period totaled $3.16, an 11 percent increase compared to the same period in 2017.  Year-to-date sales were $5,667 million, an increase of 1.7 percent compared to sales of $5,572 million in the corresponding nine-month period of 2017.  Year-to-date comparable store sales increased 0.1 percent, while total year-to-date sales, excluding the effect of foreign currency fluctuations, increased 0.7 percent.

Financial Position
As of November 3, 2018, the Company's merchandise inventories were $1,305 million, 0.6 percent lower than at the end of the third quarter last year.  Using constant currencies, inventory increased 0.5 percent. 

The Company's cash and cash equivalents totaled $748 million, while the debt on its balance sheet was $124 million.  The Company repurchased approximately 2.2 million shares for $108 million during the quarter and paid a quarterly dividend of $0.345 per share, spending $39 million.

"We're encouraged by the second consecutive quarter of comparable sales growth, more full-price selling, and greater than expected gross margin expansion," noted Lauren Peters, Executive Vice President and Chief Financial Officer.  "In addition to the improving performance, our strong balance sheet gives us the flexibility to continue investing in the business for the long term, while returning cash to our shareholders."

Store Base Update
During the third quarter, the Company opened 10 new stores, remodeled or relocated 13 stores, and closed 20 stores.  As of November 3, 2018, the Company operated 3,266 stores in 26 countries in North America, Europe, Asia, Australia, and New Zealand.  In addition, 108 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 5:00 p.m. (ET) today, November 20, 2018, to review these results and discuss the outlook for the remainder of 2018. 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 4999748, 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 (U.S. and Canada) or +1 404-537-3406 (International) with passcode 4999748 through December 4, 2018. A replay of the call will 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 2017 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.

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. In the following table, we have presented certain financial measures identified as non-GAAP, such as adjusted income before income taxes, adjusted net income, and adjusted diluted earnings per share. We present these non-GAAP measures 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 which affect comparability. In addition, these non-GAAP measures are useful in assessing our progress in achieving our long-term financial objectives.

Also, 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 businesses that are not related to currency movements.

The non-GAAP financial information is provided in addition to, and not as an alternative to, our reported results prepared in accordance with GAAP.

SOURCE Foot Locker, Inc.