Foot Locker's Q1 net income attributable to company down to US$133M from US$202M last year; total sales up 1% to US$2.18B from US$2.15B, driven by focus on expanding assortment, while comp sales down 1.9%

Sample article from our Retail & Omnichannel

NEW YORK , May 23, 2022 (press release) –

  • Total Sales Increased 1.0%; Comparable-Store Sales Decreased 1.9%

  • EPS of $1.37 and Non-GAAP EPS $1.60

  • Expect to Reach Upper End of 2022 Sales and Earnings Range

  • Repurchased $89 million of stock

Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, today reported financial results for its first quarter ended April 30, 2022.

"We are off to a strong start in 2022, reporting a solid quarter against the tough comparisons of fiscal stimulus and historically-low promotions from last year," said Richard Johnson, Chairman and Chief Executive Officer.  "Our progress in broadening and enriching our assortment continues, as we continue to meet our customers' demand for choice.  These efforts helped drive our strong results in the first quarter, and we believe will allow us to more fully participate in the robust growth of our category going forward."

Mr. Johnson continued, "As we elevate brands across our portfolio, continue to use our real estate flexibility to optimize our footprint, and evolve our omni-channel capabilities, we are excited about our improving ability to expand our customer base and fuel our consumer's desire for self-expression."

   First Quarter Results
 
  
  The Company reported net income of $133 million, or $1.37 per share, for the 13 weeks ended April 30, 2022, compared with net income of $202 million, or $1.93 per share, for the corresponding prior-year period.

On a non-GAAP basis, the Company earned $1.60 per share, compared with non-GAAP earnings per share of $1.96 in the prior-year period.

First quarter comparable-store sales decreased by 1.9%, with apparel significantly outpacing footwear. Total sales increased by 1.0%, to $2,175 million, compared with sales of $2,153 million in the first quarter of 2021. Excluding the effect of foreign exchange rate fluctuations, total sales for the first quarter increased by 3.0%.

Gross margin declined by 80 basis points compared with the prior-year period, driven by higher supply chain costs and slightly higher markdowns versus historically-low levels.

SG&A deleveraged by 190 basis points driven by labor costs and technology spend.

   Non-GAAP Adjustments
 
  
  Effective with the first quarter of 2022, the calculation for non-GAAP earnings will exclude gains and losses from all minority investments, including the adjustments related to the investment in Retailors, Ltd.  The Company believes this is a more representative measure of its recurring earnings, assists in the comparability of results, and is consistent with how management reviews performance. The non-GAAP results for 2021 will be recast to conform to the current year's presentation.  As the Company reports quarterly results through 2022, it will provide updated non-GAAP reconciliations for the corresponding prior year's quarter under this revised definition.

During the first quarter of 2022, the Company recorded adjustments to earnings, which are detailed below in the accompanying reconciliation of GAAP to non-GAAP results.  Adjustments included primarily 1) $6 million of impairments and other charges, including acquisition and integration costs, and 2) $24 million in minority interests net losses, primarily representing the investment in Retailors, Ltd. 

   Financial Position
 
  
  As of April 30, 2022, the Company's merchandise inventories were $1.4 billion, 37% higher than at the end of the first quarter last year putting us in a strong position to fulfill demand going forward.  At quarter-end, the Company's cash and cash equivalents totaled $551 million, while debt on its balance sheet was $456 million.

The Company's total cash position, net of debt, was $95 million, as compared with $1.9 billion last year. During the first quarter of 2022, the Company repurchased 2.7 million shares for $89 million and paid a quarterly dividend of $0.40 per share, for a total of $38 million. 

   Financial Outlook
 
  
  Andrew Page, Executive Vice President and Chief Financial Officer, said, "Following our solid results from the first quarter, our strong inventory position going into the remainder of the year, and our strengthening vendor relationships, based on our current visibility, we now expect to achieve the upper end of our revenue and earnings guidance for the full year.  Our balance sheet and real estate flexibility remain strategic assets for us as we continue to navigate this dynamic industry and serve the sport and sneaker community."

The Company's updated full-year 2022 outlook is summarized in the table below.

Sales Change

Upper end of down 4% to 6%

Comparable Sales Growth

Upper end of down 8% to 10%

Square Footage Growth

Down 1% to 2%

Gross Margin

30.6% to 30.8%

SG&A Rate

20.7% to 20.9%

D&A

~$214 million

Interest

~$20 million

Tax Rate

29-30%

Non-GAAP EPS

Upper end of $4.25-$4.60

Capital Expenditures

Up to $275 million

   Store Base Update
 
  
  During the first quarter, the Company opened 24 new stores, remodeled or relocated 23 stores, and closed 67 stores. 

As of April 30, 2022, the Company operated 2,815 stores in 28 countries in North America, Europe, Asia, Australia, and New Zealand.  In addition, 148 franchised stores were operating in the Middle East and Asia.

   Conference Call and Webcast
 
  
  The Company is hosting a live conference call at 9:00 a.m. ET today, Friday, May 20, 2022, to review these results and outlook and provide an update on the business. An Investor Presentation will be available on the investor relations section of the Company's website before the start of the conference call.  This conference call may be accessed live by calling toll-free 1-844-701-1163 or international toll 1-412-317-5490, or via the Investor Relations section of  footlocker-inc.com  . Please log on to the website 15 minutes prior to the call to register. An archived replay of the conference call can be accessed approximately one hour following the end of the call at 1-877-344‑7529 in the U.S. or 1-855-669-9658 in Canada or 1-412-317-0088 internationally with passcode 9912152 through June 3, 2022. A replay of the call will also be available via webcast from  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 Company's Annual Report on Form 10-K for the year ended January 29, 2022 filed on March 24, 2022. 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.
Consolidated Statements of Operations
(unaudited)
  

 

 Periods ended April 30, 2022 and May 1, 2021
(In millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

   First Quarter    

 

 

 

 2022  

 

 2021  

 

Sales

 

$

2,175

 

$

2,153

 

Cost of sales

 

 

1,435

 

 

1,404

 

Selling, general and administrative expenses

 

 

463

 

 

418

 

Depreciation and amortization

 

 

54

 

 

45

 

Impairment and other charges

 

 

6

 

 

4

 

Income from operations

 

 

217

 

 

282

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(5)

 

 

(2)

 

Other (expense) / income, net

 

 

(22)

 

 

4

 

Income before income taxes

 

 

190

 

 

284

 

Income tax expense

 

 

58

 

 

82

 

Net income

 

 

132

 

 

202

 

Net loss attributable to noncontrolling interests

 

 

1

 

 

 

Net income attributable to Foot Locker, Inc. 

 

$

133

 

$

202

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

1.37

 

$

1.93

 

Weighted-average diluted shares outstanding

 

 

97.2

 

 

105.0

 

 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. Effective with the first quarter of 2022, the Company will exclude all gains or losses associated with the minority investments to arrive at non-GAAP earnings, previously only certain amounts were adjusted. Those amounts not previously excluded from non-GAAP earnings during 2021 represented $17 million ($12 million after tax or $0.12 per share), $27 million ($20 million after tax or $0.19 per share), and $27 million ($20 million after tax or $0.21 per share) for the second, third, and fourth quarters of 2021, respectively. For the full year that represented income of $71 million ($52 million after tax or $0.50 per share) and was primarily related to our investment in Retailors, Ltd. Amounts recorded prior to 2021 were not significant. Non-GAAP financial measures that will be presented will i) exclude minority investments, ii) impairments and other charges, and iii) certain tax matters that we believe are nonrecurring or unusual in nature.

Certain financial measures are 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.

 

 FOOT LOCKER, INC.
Non-GAAP Reconciliation
(unaudited)
 

 

 Periods ended April 30, 2022 and May 1, 2021
(In millions, except per share amounts)

 

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 and are consistent with how management compensation is determined.
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. The various non-GAAP adjustments are summarized in the tables below.

 

   Reconciliation of GAAP to non-GAAP results:    

 

 

 

 

 

 

 

 

 

   First Quarter    

 

 

 2022  

 

   2021 (1)    

   Pre-tax income:    

 

 

 

 

 

 

Income before income taxes

 

$

190

 

$

284

Pre-tax adjustments excluded from GAAP:

 

 

 

 

 

 

  Impairment and other charges (2)

 

 

6

 

 

4

  Other expense (3)

 

 

24

 

 

Adjusted income before income taxes (non-GAAP)

 

$

220

 

$

288

 

 

 

 

 

 

 

   After-tax income:    

 

 

 

 

 

 

Net income

 

$

133

 

$

202

After-tax adjustments excluded from GAAP:

 

 

 

 

 

 

  Impairment and other charges, net of income tax benefit of $2 and $1 million,
  respectively (2)

 

 

4

 

 

3

  Other expense - net of income tax benefit of $6 and $- million, 
  respectively (3)

 

 

18

 

 

Adjusted net income (non-GAAP)

 

$

155

 

$

205

 

 

 

 

 

 

 

 

 

   First Quarter    

 

 

 2022  

 

   2021 (1)    

   Earnings per share:    

 

 

 

 

 

 

Diluted earnings per share

 

$

1.37

 

$

1.93

Diluted EPS amounts excluded from GAAP:

 

 

 

 

 

 

  Impairment and other charges (2)

 

 

0.05

 

 

0.03

  Other expense (3)

 

 

0.18

 

 

Adjusted diluted earnings per share (non-GAAP)

 

$

1.60

 

$

1.96

 

   Notes on Non-GAAP Adjustments:    

 

(1)

Non-GAAP results in the first quarter of 2021 were not affected by the change in presentation of minority
investments discussed above.

(2)

During the thirteen weeks ended April 30, 2022 and May 1, 2021, the Company recorded pre-tax charges of
$6 million ($4 million after-tax) and $4 million ($3 million after-tax), respectively, classified as Impairment and
Other Charges. For the thirteen weeks ended April 30, 2022, impairment and other charges included $3 million
of impairment of long-lived assets and right-of-use assets and accelerated tenancy charges, $2 million of
acquisition and integration costs related to WSS and atmos, and $1 million of other expenses. For the thirteen
weeks ended May 1, 2021, impairment and other charges included a non-cash charge of $2 million related to one
of our minority investments and charges of $2 million primarily related to severance costs in connection with the
reorganization of certain support functions.

(3)

Other expense for the thirteen weeks ended April 30, 2022 primarily consisted of a $25 million loss on the change
in fair value of our investment in Retailors, Ltd., a publicly-listed entity, which was partially offset by $1 million of
dividend income and income from other various equity method investments.

 

 FOOT LOCKER, INC.
Consolidated Balance Sheets
(unaudited)

(In millions)

 

 

 

 

 

 

 

 

 

   April 30,    

 

   May 1,    

 

 

 2022  

 

 2021  

   ASSETS    

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

  Cash and cash equivalents

 

$

551

 

$

1,963

  Merchandise inventories

 

 

1,401

 

 

1,021

  Other current assets

 

 

281

 

 

283

 

 

 

2,233

 

 

3,267

Property and equipment, net

 

 

899

 

 

769

Operating lease right-of-use assets

 

 

2,566

 

 

2,700

Deferred taxes

 

 

79

 

 

101

Goodwill

 

 

783

 

 

159

Other intangible assets, net

 

 

441

 

 

16

Minority investments

 

 

759

 

 

342

Other assets

 

 

118

 

 

88

 

 

$

7,878

 

$

7,442

 

 

 

 

 

 

 

   LIABILITIES AND SHAREHOLDERS' EQUITY    

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

   Accounts payable

 

$

565

 

$

658

   Accrued and other liabilities

 

 

428

 

 

572

   Current portion of long-term debt and obligations under finance leases

 

 

6

 

 

101

   Current portion of lease obligations

 

 

557

 

 

582

 

 

 

1,556

 

 

1,913

Long-term debt and obligations under finance leases

 

 

450

 

 

8

Long-term lease obligations

 

 

2,323

 

 

2,470

Other liabilities

 

 

334

 

 

121

Total liabilities

 

 

4,663

 

 

4,512

Total shareholders' equity

 

 

3,215

 

 

2,930

 

 

$

7,878

 

$

7,442

 

 FOOT LOCKER, INC.
Store Count and Square Footage
(unaudited)
  

 

   Store activity is as follows:    

 

 

 

 

 

 

 

 

 

 

 

 

 

   January 29,    

 

 

 

 

 

   April 30,    

 

   Relocations/    

 

 

 2022  

 

   Opened    

 

   Closed    

 

 2022  

 

   Remodels    

Foot Locker U.S.

 

802

 

3

 

19

 

786

 

8

Foot Locker Europe

 

626

 

4

 

5

 

625

 

6

Foot Locker Canada

 

95

 

1

 

3

 

93

 

Foot Locker Pacific

 

94

 

 

 

94

 

2

Foot Locker Asia   

 

30

 

 

 

30

 

Kids Foot Locker

 

410

 

12

 

5

 

417

 

1

Lady Foot Locker

 

14

 

 

3

 

11

 

Champs Sports

 

525

 

1

 

10

 

516

 

3

Footaction

 

41

 

 

19

 

22

 

Sidestep

 

86

 

 

3

 

83

 

WSS

 

98

 

1

 

 

99

 

1

atmos

 

37

 

2

 

 

39

 

2

   Total    

 

 2,858  

 

 24  

 

 67  

 

 2,815  

 

 23  

 

   Selling and gross square footage are as follows:    

 

 

 

 

 

 

 

 

 

 

 

   May 1, 2021    

   April 30, 2022    

(in thousands)

 

   Selling    

 

   Gross    

 

   Selling    

 

   Gross    

Foot Locker U.S.

 

2,389

 

4,172

 

2,374

 

4,103

Foot Locker Europe

 

1,007

 

2,146

 

1,085

 

2,256

Foot Locker Canada

 

258

 

421

 

253

 

417

Foot Locker Pacific

 

168

 

265

 

192

 

299

Foot Locker Asia

 

95

 

171

 

114

 

199

Kids Foot Locker

 

733

 

1,256

 

760

 

1,292

Lady Foot Locker

 

42

 

68

 

19

 

31

Champs Sports

 

1,903

 

2,975

 

1,903

 

2,980

Footaction

 

727

 

1,187

 

59

 

104

Sidestep

 

90

 

163

 

101

 

191

WSS (1)

 

 

 

972

 

1,223

atmos (2)

 

 

 

38

 

65

   Total    

 

 7,412  

 

 12,824  

 

 7,870  

 

 13,160  

 

(1) The Company acquired 93 existing WSS stores in September 2021.

(2) The Company acquired 38 existing atmos stores in November 2021.

 

Contact:
Robert Higginbotham
Vice President, Investor Relations
robert.higginbotham@footlocker.com  
(212) 720-4600

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