FOOT LOCKER, INC. REPORTS 2022 SECOND QUARTER RESULTS; UPDATES 2022 OUTLOOK
Foot Locker reported its second quarter results for 2022, showing a net income of $94 million, or $0.99 per share, down significantly from $430 million, or $4.09 per share, in 2021. Total sales were $2,065 million, a 9.2% decrease compared to the previous year. Comparable store sales fell 10.3%. Non-GAAP EPS was $1.10, down from $2.09. Inventory was up 52% year-over-year, positioning the company for the Back-to-School season. Foot Locker expects to meet the lower end of its original earnings guidance, citing expected macroeconomic pressures.
- Increased sales 16.4% compared to 2019 levels.
- Repurchased 1.4 million shares for $40 million.
- Healthy inventory positioning for upcoming seasons.
- Net income declined to $94 million from $430 million year-over-year.
- Total sales down 9.2% compared to 2021.
- Comparable store sales decreased 10.3% year-over-year.
- Solid second quarter sales and earnings compared to record results in 2021
- Total sales decreased
9.2% from 2021 and increased16.4% from 2019 - Comparable-store sales decreased
10.3% year-over-year - EPS of
$0.99 and Non-GAAP EPS of$1.10 - Well positioned for Back-to-School season with high-quality, fresh product
- Expect to achieve the lower end of original earnings guidance range
- Repurchased
$40 million of stock
NEW YORK, Aug. 19, 2022 /PRNewswire/ -- Foot Locker, Inc. (NYSE: FL), the New York-based specialty athletic retailer, today reported financial results for its second quarter ended July 30, 2022.
"Despite an increasingly challenging macroeconomic backdrop, we delivered a solid quarter against the favorable fiscal stimulus and promotional environment from last year," said Richard Johnson, Chairman and Chief Executive Officer. "Driven by strong execution from our team and ongoing progress against our key objectives, we grew our sales
Mr. Johnson continued, "Our strategy of diversifying our brand portfolio and offering more choice continues to resonate with consumers and is enabling us to expand our customer base. We are confident that our operational excellence, our improving ability to fuel our customer's desire for self-expression, and the secular trends driving our categories, put us in a strong position to navigate the expected ongoing macroeconomic headwinds in the back half of 2022."
Second Quarter Results
The Company reported net income of
On a non-GAAP basis, the Company earned
Second quarter comparable-store sales decreased by
Gross margin declined by 340 basis points compared with the prior-year period, driven mainly by higher markdowns, as the promotional environment started to normalize after last year's unusually favorable backdrop, followed by supply chain costs, and occupancy deleverage.
SG&A deleveraged by 210 basis points, driven mainly by labor inflation and the decline in sales.
Year-To-Date Results
For the first six months of the year, the Company posted net income of
Financial Position
As of July 30, 2022, merchandise inventories were
During the second quarter of 2022, the Company repurchased 1.4 million shares of its stock for
Financial Outlook
Andrew Page, Executive Vice President and Chief Financial Officer, said, "Following our solid results for the second quarter, against record results last year, we remain confident in our ability to achieve earnings within our original guidance range. But recognizing that the back half will likely see more pressure than we originally anticipated, we now expect to be at the lower end. Our balance sheet, real estate flexibility, and relationships with vendors all remain strategic assets that will aid us in navigating ongoing macroeconomic volatility while we continue to serve the sport and sneaker communities."
The Company's updated full-year 2022 outlook is summarized in the table below.
Metric | Prior Guidance | Updated Guidance | Commentary |
Sales Change | Upper end of down | Down | Foreign exchange pressure Team Sales divestiture |
Comparable Sales Growth | Upper end of down | Down | |
Square Footage Growth | Down | Down | |
Gross Margin | Better occupancy trends and supply chain costs Partially offset by higher markdowns | ||
SG&A Rate | Ongoing inflation pressure | ||
D&A | ~ | ~ | |
Interest | ~ | ~ | |
Tax Rate (Non-GAAP) | |||
Non-GAAP EPS | Upper end of | Lower end of original range | |
Capital Expenditures | Up to | Up to |
The Company provides earnings guidance only on a non-GAAP basis and does not provide a reconciliation of the Company's forward-looking adjusted income taxes and diluted earnings per share guidance to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. |
Store Base Update
During the second quarter, the Company opened 34 new stores, remodeled or relocated 24 stores, and closed 50 stores.
As of July 30, 2022, the Company operated 2,799 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, August 19, 2022, to review these results and provide an update on the business. An investor presentation will be available under the Investor Relations section of the Company's corporate 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 5833077 through September 2, 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 July 30, 2022 and July 31, 2021 (In millions, except per share amounts) | ||||||||||||
Second Quarter | Year-to-Date | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Sales | $ | 2,065 | $ | 2,275 | $ | 4,240 | $ | 4,428 | ||||
Cost of sales | 1,411 | 1,477 | 2,846 | 2,881 | ||||||||
Selling, general, and administrative expenses | 452 | 450 | 915 | 868 | ||||||||
Depreciation and amortization | 51 | 48 | 105 | 93 | ||||||||
Impairment and other charges | 12 | 36 | 18 | 40 | ||||||||
Income from operations | 139 | 264 | 356 | 546 | ||||||||
Interest expense, net | (5) | (2) | (10) | (4) | ||||||||
Other income / (expense), net | 9 | 325 | (13) | 329 | ||||||||
Income before income taxes | 143 | 587 | 333 | 871 | ||||||||
Income tax expense | 49 | 157 | 107 | 239 | ||||||||
Net income | 94 | 430 | $ | 226 | $ | 632 | ||||||
Net loss attributable to noncontrolling interests | — | — | 1 | — | ||||||||
Net income attributable to Foot Locker, Inc. | $ | 94 | $ | 430 | $ | 227 | $ | 632 | ||||
Diluted earnings per share | $ | 0.99 | $ | 4.09 | $ | 2.36 | $ | 6.02 | ||||
Weighted-average diluted shares outstanding | 95.1 | 105.2 | 96.1 | 105.1 |
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 excludes 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
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.
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.
FOOT LOCKER, INC. Non-GAAP Reconciliation (unaudited)
Periods ended July 30, 2022 and July 31, 2021 (In millions, except per share amounts) | ||||||||||||
Reconciliation of GAAP to non-GAAP results: | ||||||||||||
Second Quarter | Year-to-Date | |||||||||||
2022 | 2021 (1) | 2022 | 2021 (1) | |||||||||
Pre-tax income: | ||||||||||||
Income before income taxes | $ | 143 | $ | 587 | $ | 333 | $ | 871 | ||||
Pre-tax adjustments excluded from GAAP: | ||||||||||||
Impairment and other charges (2) | 12 | 36 | 18 | 40 | ||||||||
Other income / expense (3) | (6) | (320) | 18 | (320) | ||||||||
Adjusted income before income taxes (non-GAAP) | $ | 149 | $ | 303 | $ | 369 | $ | 591 | ||||
After-tax income: | ||||||||||||
Net income attributable to Foot Locker, Inc. | $ | 94 | $ | 430 | $ | 227 | $ | 632 | ||||
After-tax adjustments excluded from GAAP: | ||||||||||||
Impairment and other charges, net of income tax benefit of | 9 | 27 | 13 | 30 | ||||||||
Other income / expense, net of income tax (expense)/benefit of | (3) | (236) | 15 | (236) | ||||||||
Tax reserves charge (4) | 5 | — | 5 | — | ||||||||
Adjusted net income (non-GAAP) | $ | 105 | $ | 221 | $ | 260 | $ | 426 | ||||
Second Quarter | Year-to-Date | |||||||||||
2022 | 2021 (1) | 2022 | 2021 (1) | |||||||||
Earnings per share: | ||||||||||||
Diluted earnings per share | $ | 0.99 | $ | 4.09 | $ | 2.36 | $ | 6.02 | ||||
Diluted EPS amounts excluded from GAAP: | ||||||||||||
Impairment and other charges (2) | 0.09 | 0.25 | 0.14 | 0.28 | ||||||||
Other income / expense (3) | (0.03) | (2.25) | 0.16 | (2.25) | ||||||||
Tax reserves charge (4) | 0.05 | — | 0.05 | — | ||||||||
Adjusted diluted earnings per share (non-GAAP) | $ | 1.10 | $ | 2.09 | $ | 2.71 | $ | 4.05 |
Notes on Non-GAAP Adjustments: | |
(1) | Non-GAAP results in the second quarter and year-to-date periods of 2021 previously disclosed were affected by the current year change in presentation of minority investments discussed above, which excluded |
(2) | For the second quarter of 2022, impairment and other charges included |
For the second quarter of 2021, impairment and other charges included | |
Also included in the year-to-date period of 2021 is a | |
(3) | Other income / expense for the second quarter of 2022 primarily consisted of an |
For the second quarter and year-to-date 2021, other income included | |
(4) | In the second quarter of 2022, the Company recorded a |
FOOT LOCKER, INC. Consolidated Balance Sheets (unaudited) (In millions) | ||||||
July 30, | July 31, | |||||
2022 | 2021 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 386 | $ | 1,845 | ||
Merchandise inventories | 1,644 | 1,081 | ||||
Other current assets | 285 | 252 | ||||
2,315 | 3,178 | |||||
Property and equipment, net | 899 | 743 | ||||
Operating lease right-of-use assets | 2,526 | 2,569 | ||||
Deferred taxes | 74 | 108 | ||||
Goodwill | 773 | 158 | ||||
Other intangible assets, net | 432 | 16 | ||||
Minority investments | 736 | 728 | ||||
Other assets | 113 | 85 | ||||
$ | 7,868 | $ | 7,585 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 596 | $ | 539 | ||
Accrued and other liabilities | 435 | 474 | ||||
Current portion of long-term debt and obligations under finance leases | 6 | 102 | ||||
Current portion of lease obligations | 548 | 566 | ||||
1,585 | 1,681 | |||||
Long-term debt and obligations under finance leases | 449 | 10 | ||||
Long-term lease obligations | 2,287 | 2,363 | ||||
Other liabilities | 330 | 190 | ||||
Total liabilities | 4,651 | 4,244 | ||||
Total shareholders' equity | 3,217 | 3,341 | ||||
$ | 7,868 | $ | 7,585 |
FOOT LOCKER, INC. Store Count and Square Footage (unaudited) | ||||||||||
Store activity is as follows: | ||||||||||
January 29, | July 30, | Relocations/ | ||||||||
2022 | Opened | Closed | 2022 | Remodels | ||||||
Foot Locker U.S. | 802 | 15 | 42 | 775 | 16 | |||||
Foot Locker Europe | 626 | 11 | 7 | 630 | 12 | |||||
Foot Locker Canada | 95 | 1 | 5 | 91 | — | |||||
Foot Locker Pacific | 94 | — | — | 94 | 5 | |||||
Foot Locker Asia | 30 | 3 | — | 33 | — | |||||
Kids Foot Locker | 410 | 17 | 13 | 414 | 4 | |||||
Lady Foot Locker | 14 | — | 4 | 10 | — | |||||
Champs Sports | 525 | 1 | 14 | 512 | 3 | |||||
Footaction | 41 | — | 27 | 14 | — | |||||
Sidestep | 86 | 1 | 5 | 82 | — | |||||
WSS | 98 | 7 | — | 105 | 4 | |||||
atmos | 37 | 2 | — | 39 | 3 | |||||
Total | 2,858 | 58 | 117 | 2,799 | 47 |
Selling and gross square footage are as follows: | ||||||||
July 31, 2021 | July 30, 2022 | |||||||
(in thousands) | Selling | Gross | Selling | Gross | ||||
Foot Locker U.S. | 2,372 | 4,133 | 2,363 | 4,079 | ||||
Foot Locker Europe | 1,027 | 2,177 | 1,104 | 2,284 | ||||
Foot Locker Canada | 254 | 415 | 250 | 411 | ||||
Foot Locker Pacific | 174 | 273 | 196 | 303 | ||||
Foot Locker Asia | 105 | 185 | 126 | 233 | ||||
Kids Foot Locker | 719 | 1,235 | 761 | 1,294 | ||||
Lady Foot Locker | 25 | 57 | 19 | 31 | ||||
Champs Sports | 1,896 | 2,965 | 1,890 | 2,958 | ||||
Footaction | 666 | 1,089 | 38 | 67 | ||||
Sidestep | 91 | 166 | 101 | 191 | ||||
WSS (1) | — | — | 1,035 | 1,301 | ||||
atmos (2) | — | — | 38 | 64 | ||||
Total | 7,329 | 12,695 | 7,921 | 13,216 |
(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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SOURCE Foot Locker IR
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