FOOT LOCKER, INC. REPORTS 2022 SECOND QUARTER RESULTS; UPDATES 2022 OUTLOOK
- Solid second quarter sales and earnings compared to record results in 2021
- Total sales decreased 9.2% from 2021 and increased 16.4% 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
"Despite an increasingly challenging macroeconomic backdrop, we delivered a solid quarter against the favorable fiscal stimulus and promotional environment from last year," said
Second Quarter Results
The Company reported net income of
On a non-GAAP basis, the Company earned
Second quarter comparable-store sales decreased by 10.3% versus record sales levels from last year. Total sales decreased by 9.2%, to
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 $1,644 million, up 52% compared to the supply-constrained levels at the end of the second quarter last year. Current inventory quality and aging are healthy, positioning the Company well for the Back-to-School season and the third quarter overall. At quarter-end, the Company's cash and cash equivalents totaled $386 million, while debt was $455 million.
During the second quarter of 2022, the Company repurchased 1.4 million shares of its stock for $40 million and paid a quarterly dividend of $0.40 per share, for a total of $38 million.
Financial Outlook
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 4% to 6% |
Down 6% to 7% |
Foreign exchange pressure Team Sales divestiture |
Comparable Sales Growth |
Upper end of down 8% to 10% |
Down 8% to 9% |
|
Square Footage Growth |
Down 1% to 2% |
Down 1% to 2% |
|
Gross Margin |
30.6% to 30.8% |
31.1% to 31.2% |
Better occupancy trends and supply chain costs Partially offset by higher markdowns |
SG&A Rate |
20.7% to 20.9% |
21.3% to 21.4% |
Ongoing inflation pressure |
D&A |
|
|
|
Interest |
|
|
|
Tax Rate (Non-GAAP) |
29% to 30% |
30.0% to 30.5% |
|
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
Conference Call and Webcast
The Company is hosting a live conference call at
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
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
Consolidated Statements of Operations (unaudited)
Periods ended (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 |
$ |
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.
Non-GAAP Reconciliation (unaudited)
Periods ended (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 |
$ |
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 |
Consolidated Balance Sheets (unaudited) (In millions) |
||||||
|
|
|||||
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 |
||||
|
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 |
Store Count and Square Footage (unaudited) |
||||||||||
Store activity is as follows: |
||||||||||
|
|
Relocations/ |
||||||||
2022 |
Opened |
Closed |
2022 |
Remodels |
||||||
Foot Locker |
802 |
15 |
42 |
775 |
16 |
|||||
Foot Locker Europe |
626 |
11 |
7 |
630 |
12 |
|||||
|
95 |
1 |
5 |
91 |
— |
|||||
Foot Locker Pacific |
94 |
— |
— |
94 |
5 |
|||||
Foot Locker Asia |
30 |
3 |
— |
33 |
— |
|||||
Kids |
410 |
17 |
13 |
414 |
4 |
|||||
|
14 |
— |
4 |
10 |
— |
|||||
|
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: |
||||||||
|
|
|||||||
(in thousands) |
Selling |
Gross |
Selling |
Gross |
||||
Foot Locker |
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 |
719 |
1,235 |
761 |
1,294 |
||||
|
25 |
57 |
19 |
31 |
||||
|
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 |
(2) The Company acquired 38 existing atmos stores in |
Contact:
Vice President, Investor Relations
robert.higginbotham@footlocker.com
(212) 720-4600
View original content:https://www.prnewswire.com/news-releases/foot-locker-inc-reports-2022-second-quarter-results-updates-2022-outlook-301608980.html
SOURCE Foot Locker IR