PR Newswire | May 21, 2021 06:45AM EDT

05/21 05:45 CDT

Foot Locker, Inc. Reports 2021 First Quarter Results- First Quarter Comparable Store Sales Increased 80.3 Percent- First Quarter Net Income of $202 Million, or $1.93 Per Share- Non-GAAP Net Income of $205 Million, or $1.96 Per Share- Announces Actions to Position Store Fleet for the Future NEW YORK, May 21, 2021

NEW YORK, May 21, 2021 /PRNewswire/ -- Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, today reported financial results for its first quarter ended May 1, 2021.

First Quarter ResultsThe Company reported net income of $202 million, or $1.93 per share, for the 13 weeks ended May 1, 2021, as compared with a net loss of $110 million, or $1.06 per share, for the corresponding prior-year period. On a non-GAAP basis, the Company earned $1.96 per share, versus a loss of $0.67 per share in the first quarter of 2020. As compared to the first quarter of 2019, earnings per share increased 27.0 percent from the $1.52 per share earned in that period. On a non-GAAP basis, earnings per share increased 28.1 percent from the $1.53 per share earned in the first quarter of 2019.

First quarter comparable-store sales increased by 80.3 percent. Total sales increased by 83.1 percent, to $2,153 million in the first quarter of 2021, compared with sales of $1,176 million in the same period last year. Excluding the effect of foreign exchange rate fluctuations, total sales for the first quarter increased by 79.4 percent. As compared to the first quarter of 2019, total sales increased 3.6 percent, and 2.4 percent excluding the effect of foreign exchange rate fluctuations.

"I am extremely pleased with the strength of our performance in the first quarter, compared not only to last year's heavily COVID impacted first quarter, but also relative to the first quarter of 2019. Against the ongoing challenges of pandemic-related store closures in Europe and Canada and U.S. ports congestion, our top and bottom-line results were nothing short of exemplary," said Richard Johnson, Chairman and Chief Executive Officer. "Our merchandise offering resonated very well with our customers, driving strength in our stores and continued momentum in our digital business. With strong product tailwinds, we remain optimistic about our category and our ability to drive long-term growth, profitability and shareholder value."

"The freshness of our inventory, coupled with robust demand across our assortment, resulted in significantly less promotional activity during the first quarter, driving gross margin expansion and improved inventory turns," added Andrew Page, Executive Vice President and Chief Financial Officer. "At the same time, we continued to exercise discipline with expense management while strategically investing in our business. Importantly, the underlying health of our business and financial position are strong, enabling us to continue advancing our strategic initiatives."

Non-GAAP AdjustmentsDuring the first quarter of 2021, the Company recorded adjustments to earnings, which are detailed below in the accompanying reconciliation of GAAP to non-GAAP results. The items included: 1) a $2 million charge related to the impairment of one of the Company's minority investments; and 2) charges of $2 million primarily related to severance costs in connection with the reorganization of certain support functions.

Financial PositionAt May 1, 2021, the Company's merchandise inventories were $1,021 million, 30.0 percent lower than at the end of the first quarter last year. Using constant currencies, inventory decreased by 32.7 percent.

At quarter-end, the Company's cash and cash equivalents totaled $1,963 million, while the debt on its balance sheet was $109 million. The Company's total cash position, net of debt, was $1,293 million higher than at the same time last year. During the first quarter of 2021, the Company spent $34 million to repurchase 620,544 shares, returning a total of $55 million to shareholders through its share repurchase program and dividends. In addition, the Company invested $51 million in its store fleet, digital platforms, supply chain and logistics capabilities, and other infrastructure.

Store Base UpdateDuring the first quarter, the Company opened 12 new stores, remodeled or relocated 15 stores, and closed 58 stores. As of May 1, 2021, the Company operated 2,952 stores in 27 countries in North America, Europe, Asia, Australia, and New Zealand. In addition, 131 franchised Foot Locker stores were operating in the Middle East.

The Company announced today that it is taking action, in partnership with its suppliers, to position its store fleet for the future. As part of this effort, in the second quarter of 2021, the Company decided to convert approximately one third of its Footaction stores into other existing banner concepts over the course of the year to focus growth on its iconic banners. The Company will close the majority of the remaining Footaction stores as leases expire over the next two years and believes this strategic decision will enable it to better serve its consumers in a post-COVID marketplace.

Financial OutlookGiven the ongoing uncertainty created by COVID-19, the Company is not providing detailed full-year 2021 guidance at this time.

Conference CallThe Company is hosting a live conference call at 9:00 a.m. ET today, Friday May 21, 2021, to review these results and provide an update on the business. 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 the Foot Locker, Inc. website at https://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 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 10154491 through June 4, 2021. A replay of the call will be also be available via webcast from the same Investor Relations section of the Foot Locker, Inc. website at https://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 Company's Annual Report on Form 10-K for the year ended January 30, 2021 filed on March 25, 2021. 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.

Consolidated Statements of Operations (unaudited)



Periods ended May 1, 2021 and May 2, 2020 (In millions, except per share amounts)





First Quarter

2021 2020

Sales $2,153$1,176

Cost of sales 1,404 905

Selling, general and administrative expenses 418 316

Depreciation and amortization 45 44

Impairment and other charges 4 16

Income (loss) from operations 282 (105)



Interest expense, net (2) (1)

Other income, net 4 1

Income (loss) before income taxes 284 (105)

Income tax expense 82 5

Net income (loss) $202 $(110)



Diluted earnings (loss) per share $1.93 $(1.06)

Weighted-average diluted shares outstanding 105.0 104.3

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. We have presented certain financial measures 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.

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.

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.

Non-GAAP Reconciliation (unaudited)



Periods ended May 1, 2021 and May 2, 2020 (In millions, except per share amounts)





Reconciliation of GAAP to non-GAAP results:



First Quarter

2021 2020

Pre-tax income:

Income (loss) before income taxes $284$(105)

Pre-tax adjustments excluded from GAAP:

Impairment and other charges ^(1) 4 16

Adjusted income (loss) before income taxes (non-GAAP) $288$(89)



After-tax income:

Net income (loss) $202$(110)

After-tax adjustments excluded from GAAP:

Impairment and other charges, net of income tax benefit of $1 3 13 and $3 million, respectively ^(1)

Tax charge related to revaluation of certain intellectual - 27 property rights ^(2)

Adjusted net income (loss) (non-GAAP) $205$(70)



First Quarter

2021 2020

Earnings per share:

Diluted earnings (loss) per share $1.93$(1.06)

Diluted EPS amounts excluded from GAAP:

Impairment and other charges ^(1) 0.03 0.13

Tax charge related to revaluation of certain intellectual - 0.26 property rights ^(2)

Adjusted diluted earnings (loss) per share (non-GAAP) $1.96$(0.67)

Notes on Non-GAAP Adjustments:

During the first quarters of 2021 and 2020, the Company recorded impairment and other charges of $4 million ($3 million after-tax) and $16 million ($13 million after-tax), respectively. 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(1) charges of $2 million primarily related to severance costs in connection with the reorganization of certain support functions. For the thirteen weeks ended May 2, 2020, we recorded impairment charges of $15 million related to certain Runners Point and Sidestep stores and other underperforming stores in Europe. Additionally, the Company recorded $1 million related to administrative costs associated with the pension plan reformation.

During the first quarter of 2020, the Company recorded a $27 million tax(2) charge related to the revaluation of certain intellectual property rights, pursuant to a non-U.S. advance pricing agreement.?

Consolidated Balance Sheets (unaudited) (In millions)



May 1, May 2,

2021 2020

ASSETS



Current assets:

Cash and cash equivalents $1,963$1,012

Merchandise inventories 1,021 1,458

Other current assets 283 268

3,267 2,738

Property and equipment, net 769 787

Operating lease right-of-use assets 2,700 2,807

Deferred taxes 101 63

Goodwill 159 156

Other intangible assets, net 16 19

Minority investments 342 147

Other assets 88 79

$7,442$6,796



LIABILITIES AND SHAREHOLDERS' EQUITY



Current liabilities:

Accounts payable $658 $468

Accrued and other liabilities 572 264

Current portion of long-term debt and obligations under 101 - finance leases

Current portion of lease obligations 582 581

Revolving credit facility - 330

1,913 1,643

Long-term debt and obligations under finance leases 8 121

Long-term lease obligations 2,470 2,591

Other liabilities 121 127

Total liabilities 4,512 4,482

Total shareholders' equity 2,930 2,314

$7,442$6,796

Store Count and Square Footage (unaudited)



Store activity is as follows:





January 30, May 1,Relocations/

2021 OpenedClosed2021 Remodels

Foot Locker U.S. 848 2 11 839 4

Foot Locker Europe 624 1 12 613 5

Foot Locker Canada 101 - 1 100 3

Foot Locker Pacific93 - - 93 2

Foot Locker Asia 20 3 - 23 -

Kids Foot Locker 422 3 7 418 -

Lady Foot Locker 35 - 8 27 -

Champs Sports 539 1 10 530 1

Footaction 240 - 9 231 -

Sidestep 76 2 - 78 -

Total 2,998 12 58 2,952 15

Selling and gross square footage are as follows:





May 2, 2020 May 1, 2021

(in thousands) SellingGross SellingGross

Foot Locker U.S. 2,411 4,225 2,389 4,172

Foot Locker Europe 1,013 2,178 1,007 2,146

Foot Locker Canada 261 428 258 421

Foot Locker Pacific148 240 168 265

Foot Locker Asia 42 76 95 171

Kids Foot Locker 739 1,277 733 1,256

Lady Foot Locker 65 108 42 68

Champs Sports 1,934 3,006 1,903 2,975

Footaction 763 1,252 727 1,187

Runners Point 99 177 - -

Sidestep 73 134 90 163

Total 7,548 13,1017,412 12,824

Contact: James R. LanceVice President, Corporate Finance and Investor Relations Foot Locker, Inc. (212) 720-4600

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SOURCE Foot Locker, Inc.