s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, Zip Code)
(
(Registrant’s telephone number, including area code)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Preferred Stock Purchase Rights | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer ◻ | Non-accelerated filer ◻ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Number of shares of Common Stock outstanding as of September 3, 2021:
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks,” “continues,” “feels,” “forecasts,” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or “projects.” These statements include statements relating to trends in or expectations relating to the expected effects of our initiatives, strategies and plans, as well as trends in or expectations regarding our financial results and long-term growth model and drivers, tax rates, business opportunities and expansion, acquisitions or investments, expenses, dividends, share repurchases, and our mitigation strategies, liquidity, cash flow from operations, use of cash and cash requirements, borrowing capacity and use of proceeds, repatriation of cash to the U.S., the effects of all variants of the coronavirus pandemic (COVID-19), including but not limited to supply chain issues, and social unrest, on our financial results. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak to our views only as of the date of this filing. These forward-looking statements are all based on currently-available operating, financial, and competitive information, and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control, such as the ongoing uncertainty related to COVID-19. Additional risks and uncertainties that we do not presently know about or that we currently consider to be insignificant may also affect our business operations and financial performance.
Please refer to “Item 1A. Risk Factors” of our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission. Given these risks and uncertainties, you should not rely on forward-looking statements as predictions of actual results. Any or all of the forward-looking statements contained in this report or any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
July 31, | August 1, | January 30, | ||||||||
($ in millions, except share amounts) |
| 2021 |
| 2020 |
| 2021* |
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ASSETS |
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Current assets: |
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Cash and cash equivalents | $ | | $ | | $ | | ||||
Merchandise inventories |
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Other current assets |
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Property and equipment, net |
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Operating lease right-of-use assets | | | | |||||||
Deferred taxes |
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Goodwill |
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Other intangible assets, net |
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Minority investments | | | | |||||||
Other assets |
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$ | | $ | | $ | | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable | $ | | $ | | $ | | ||||
Accrued and other liabilities |
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Current portion of debt and obligations under finance leases | | — | | |||||||
Current portion of lease obligations | | | | |||||||
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Long-term debt and obligations under finance leases |
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Long-term lease obligations | | | | |||||||
Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Shareholders’ equity: | ||||||||||
Common stock and paid-in capital: | | | | |||||||
Retained earnings | | | | |||||||
Accumulated other comprehensive loss | ( | ( | ( | |||||||
Less: Treasury stock at cost: | ( | — | ( | |||||||
Noncontrolling interest | | — | | |||||||
Total shareholders' equity | | | | |||||||
$ | | $ | | $ | |
* |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
Second Quarter 2021 Form 10-Q Page 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Thirteen weeks ended | Twenty-six weeks ended |
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July 31, | August 1, | July 31, | August 1, | ||||||||||
($ in millions, except per share amounts) |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
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Sales | $ | | $ | | $ | | $ | | |||||
Cost of sales |
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Selling, general and administrative expenses |
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Depreciation and amortization |
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Impairment and other charges |
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Income (loss) from operations |
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Interest expense, net |
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Other income, net |
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Income (loss) before income taxes |
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Income tax expense |
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Net income (loss) | $ | | $ | | $ | | $ | ( | |||||
Basic earnings (loss) per share | $ | | $ | | $ | | $ | ( | |||||
Weighted-average shares outstanding |
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Diluted earnings (loss) per share | $ | | $ | | $ | | $ | ( | |||||
Weighted-average shares outstanding, assuming dilution |
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See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
Second Quarter 2021 Form 10-Q Page 2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Thirteen weeks ended | Twenty-six weeks ended |
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July 31, | August 1, | July 31, | August 1, | ||||||||||
($ in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
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Net income (loss) | $ | | $ | | $ | | $ | ( | |||||
Other comprehensive income (loss), net of income tax |
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Foreign currency translation adjustment: |
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Translation adjustment arising during the period, net of income tax expense of $-, $ |
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Cash flow hedges: |
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Change in fair value of derivatives, net of income tax expense of $-, $-, $-, and $ |
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Pension and postretirement adjustments: |
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Amortization of net actuarial gain/loss and prior service cost included in net periodic benefit costs, net of income tax expense of $-, $ |
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Comprehensive income (loss) | $ | | $ | | $ | | $ | ( |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
Second Quarter 2021 Form 10-Q Page 3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
| Additional Paid-In |
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| Accumulated | |||||||||||||||||
Capital & | Other | Total | ||||||||||||||||||||
Thirteen weeks ended | Common Stock | Treasury Stock | Retained | Comprehensive | Noncontrolling | Shareholders' | ||||||||||||||||
(shares in thousands, amounts in millions) | Shares | Amount | Shares | Amount | Earnings | Loss | interests | Equity | ||||||||||||||
Balance at May 1, 2021 |
| | $ | | ( | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Restricted stock issued |
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Issued under director and stock plans |
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Share based compensation expense |
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Shares of common stock used to satisfy tax withholding obligations |
| ( | ( | ( | ||||||||||||||||||
Share repurchases |
| ( | ( | ( | ||||||||||||||||||
Reissued for Employee Stock Purchase Plan ("ESPP") |
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Net income |
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Cash dividends declared on common stock ($ |
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Translation adjustment, net of tax |
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Pension and postretirement adjustments, net of tax |
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Balance at July 31, 2021 |
| | $ | |
| ( | $ | ( | $ | | $ | ( | $ | | $ | | ||||||
Balance at May 2, 2020 |
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| ( | $ | — | $ | | $ | ( | $ | — | $ | | ||||||
Restricted stock issued |
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Issued under director and stock plans |
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Share-based compensation expense |
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Reissued for ESPP |
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Net income |
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Translation adjustment, net of tax |
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Pension and postretirement adjustments, net of tax |
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Balance at August 1, 2020 |
| | $ | |
| — | $ | — | $ | | $ | ( | $ | — | $ | |
| Additional Paid-In |
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| Accumulated | |||||||||||||||||
Capital & | Other | Total | ||||||||||||||||||||
Twenty-six weeks ended | Common Stock | Treasury Stock | Retained | Comprehensive | Noncontrolling | Shareholders' | ||||||||||||||||
(shares in thousands, amounts in millions) | Shares | Amount | Shares | Amount | Earnings | Loss | interests | Equity | ||||||||||||||
Balance at January 30, 2021 |
| | $ | |
| ( | $ | ( | $ | | $ | ( | $ | | $ | | ||||||
Restricted stock issued |
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Issued under director and stock plans |
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Share based compensation expense |
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Shares of common stock used to satisfy tax withholding obligations |
| ( | ( | ( | ||||||||||||||||||
Share repurchases |
| ( | ( | ( | ||||||||||||||||||
Reissued for ESPP |
| ( | | | | |||||||||||||||||
Net income |
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Cash dividends declared on common stock ($ |
| ( | ( | |||||||||||||||||||
Translation adjustment, net of tax |
| ( | ( | |||||||||||||||||||
Pension and postretirement adjustments, net of tax |
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Balance at July 31, 2021 |
| | $ | |
| ( | $ | ( | $ | | $ | ( | $ | | $ | | ||||||
Balance at February 1, 2020 |
| | $ | |
| — | $ | — | $ | | $ | ( | $ | — | $ | | ||||||
Restricted stock issued |
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Issued under director and stock plans |
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Share-based compensation expense |
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Shares of common stock used to satisfy tax withholding obligations |
| ( | — | — | ||||||||||||||||||
Reissued for ESPP |
| | — | — | ||||||||||||||||||
Net loss |
| ( | ( | |||||||||||||||||||
Cash dividends declared on common stock ($ |
| ( | ( | |||||||||||||||||||
Translation adjustment, net of tax |
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Change in cash flow hedges, net of tax |
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Pension and postretirement adjustments, net of tax |
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Balance at August 1, 2020 |
| | $ | |
| — | $ | — | $ | | $ | ( | $ | — | $ | |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
Second Quarter 2021 Form 10-Q Page 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-six weeks ended | ||||||
July 31, | August 1, | |||||
($ in millions) |
| 2021 |
| 2020 | ||
From operating activities: |
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Net income (loss) | $ | | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Non-cash impairment and other charges |
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Non-cash gains | ( | — | ||||
Depreciation and amortization |
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Deferred income taxes |
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Share-based compensation expense |
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Change in assets and liabilities: |
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Merchandise inventories |
| ( |
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Accounts payable |
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Accrued and other liabilities |
| ( |
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Insurance receivable for inventory loss |
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Other, net |
| ( |
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Net cash provided by operating activities |
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From investing activities: |
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Capital expenditures |
| ( |
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Minority investments |
| ( |
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Proceeds from sale of property | | — | ||||
Insurance proceeds related to loss on property and equipment |
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Net cash used in investing activities |
| ( |
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From financing activities: |
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Dividends paid on common stock | ( |
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Purchase of treasury shares | ( |
| — | |||
Proceeds from exercise of stock options | |
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Treasury stock reissued under employee stock plan |
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Shares of common stock repurchased to satisfy tax withholding obligations | ( |
| — | |||
Payment of obligations under finance leases | ( | — | ||||
Payment of revolving credit agreement costs | ( | ( | ||||
Proceeds from common stock issued under employee stock plan | — | | ||||
Proceeds from the revolving credit facility | — | | ||||
Repayment of the revolving credit facility | — | ( | ||||
Net cash used in financing activities |
| ( |
| ( | ||
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash |
| ( |
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Net change in cash, cash equivalents, and restricted cash |
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Cash, cash equivalents, and restricted cash at beginning of year |
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Cash, cash equivalents, and restricted cash at end of period | $ | | $ | | ||
Cash paid during the year: |
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Interest | $ | | $ | | ||
Income taxes | $ | | $ | | ||
Non-cash investing activities: | ||||||
Cash paid for amounts included in measurement of lease liabilities | $ | $ | ||||
Right-of-use assets obtained in exchange for operating lease obligations | $ | $ | ||||
Assets obtained in exchange for finance lease obligations | $ | $ | |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
Second Quarter 2021 Form 10-Q Page 5
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements contained in this report are unaudited. In the opinion of management, the condensed consolidated financial statements include all normal, recurring adjustments necessary for a fair presentation of the results for the interim periods presented. As used in these Notes to the Unaudited Condensed Consolidated Financial Statements the terms “Foot Locker,” “Company,” “we,” “our,” and “us” refer to Foot Locker, Inc. and its consolidated subsidiaries.
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in the accompanying Unaudited Condensed Consolidated Financial Statements and these Notes and related disclosures. Actual results may differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results expected for the year. The results of operations for the period ended July 31, 2021 are not necessarily indicative of the results to be expected for the full fiscal year due to the continued uncertainty of general economic conditions that may affect us for the remainder of 2021. Specifically, the ongoing pandemic (“COVID-19”) including the dissemination and adoption of COVID-19 vaccines and their effectiveness against COVID-19 and its evolving strains, some of which may be more transmissible or virulent than the initial strain or additional widespread resurgences in COVID-19 infections, including evolving safety protocols including requirements for proof of vaccination, are significant uncertainties. COVID-19, as well as port delays, may affect our sales, traffic to our stores, our distribution capabilities, and distribution capabilities of our suppliers.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in our Form 10-K for the year ended January 30, 2021, as filed with the U.S. Securities and Exchange Commission on March 25, 2021.
There were no significant changes to the policies disclosed in Note 1, Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the year ended January 30, 2021.
Recent Accounting Pronouncements
Recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on our present or future consolidated financial statements.
2. Revenue
The table below presents sales disaggregated based upon sales channel. Sales are attributable to the channel in which the sales transaction is initiated.
Thirteen weeks ended | Twenty-six weeks ended | |||||||||||
July 31, | August 1, | July 31, | August 1, | |||||||||
($ in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Sales by Channel | ||||||||||||
Stores | $ | | $ | | $ | | $ | | ||||
Direct-to-customers |
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Total sales | $ | | $ | | $ | | $ | |
Second Quarter 2021 Form 10-Q Page 6