SEC Filing | Foot Locker, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: July 31, 2021


☐	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: 1-10299

(Exact name of registrant as specified in its charter)


New York	13-3513936
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

330 West 34^th Street, New York, New York 10001

(Address of principal executive offices, Zip Code)

(212-720-3700)

(Registrant’s telephone number, including area code)

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

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. Yes ☒ No ◻

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). Yes ☒ No ◻

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.


Large accelerated filer ☒	Accelerated filer ◻	Non-accelerated filer ◻	Smaller reporting company ◻
Emerging growth company ◻

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 ◻ No ☒

Number of shares of Common Stock outstanding as of September 3, 2021: 103,807,679

Table of Contents

TABLE OF CONTENTS

			Page
PART I	FINANCIAL INFORMATION		1
	Item 1.	Financial Statements	1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Operations	2
		Condensed Consolidated Statements of Comprehensive Income (Loss)	3
		Condensed Consolidated Statements of Changes in Shareholders’ Equity	4
		Condensed Consolidated Statements of Cash Flows	5
		Notes to the Unaudited Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 4.	Controls and Procedures	29

PART II	OTHER INFORMATION		29
	Item 1.	Legal Proceedings	29
	Item 1A.	Risk Factors	30
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 6.	Exhibits	31

SIGNATURE			32

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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.

Table of Contents

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*
ASSETS

Current assets:
Cash and cash equivalents	$	1,845	$	1,373	$	1,680
Merchandise inventories		1,081		1,194		923
Other current assets		252		266		232
		3,178		2,833		2,835
Property and equipment, net		743		782		788
Operating lease right-of-use assets		2,569		2,810		2,716
Deferred taxes		108		70		101
Goodwill		158		158		159
Other intangible assets, net		16		19		17
Minority investments		728		150		337
Other assets		85		90		90
	$	7,585	$	6,912	$	7,043

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	539	$	630	$	402
Accrued and other liabilities		474		455		560
Current portion of debt and obligations under finance leases		102		—		102
Current portion of lease obligations		566		587		580
		1,681		1,672		1,644
Long-term debt and obligations under finance leases		10		124		8
Long-term lease obligations		2,363		2,579		2,499
Other liabilities		190		134		116
Total liabilities		4,244		4,509		4,267
Commitments and contingencies
Shareholders’ equity:
Common stock and paid-in capital: 104,515,702; 104,391,691; and 103,693,359 shares issued, respectively		799		774		779
Retained earnings		2,916		1,996		2,326
Accumulated other comprehensive loss		(338)		(367)		(331)
Less: Treasury stock at cost: 714,490; 426; and 74,236 shares, respectively		(41)		—		(3)
Noncontrolling interest		5		—		5
Total shareholders' equity		3,341		2,403		2,776
	$	7,585	$	6,912	$	7,043

The balance sheet at January 30, 2021 has been derived from the previously reported audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Foot Locker, Inc.’s Annual Report on Form 10-K for the year ended January 30, 2021.

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2021 Form 10-Q Page 1

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Thirteen weeks ended				Twenty-six weeks ended
	July 31,		August 1,		July 31,		August 1,
($ in millions, except per share amounts)	2021		2020		2021		2020
Sales	$	2,275	$	2,077	$	4,428	$	3,253

Cost of sales		1,477		1,539		2,881		2,444
Selling, general and administrative expenses		450		387		868		703
Depreciation and amortization		48		44		93		88
Impairment and other charges		36		38		40		54
Income (loss) from operations		264		69		546		(36)

Interest expense, net		(2)		(2)		(4)		(3)
Other income, net		325		3		329		4
Income (loss) before income taxes		587		70		871		(35)
Income tax expense		157		25		239		30
Net income (loss)	$	430	$	45	$	632	$	(65)

Basic earnings (loss) per share	$	4.14	$	0.43	$	6.10	$	(0.62)
Weighted-average shares outstanding		103.8		104.5		103.7		104.4

Diluted earnings (loss) per share	$	4.09	$	0.43	$	6.02	$	(0.62)
Weighted-average shares outstanding, assuming dilution		105.2		105.1		105.1		104.4

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2021 Form 10-Q Page 2

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


		Thirteen weeks ended				Twenty-six weeks ended
	July 31,		August 1,		July 31,		August 1,
($ in millions)	2021		2020		2021		2020
Net income (loss)	$	430	$	45	$	632	$	(65)
Other comprehensive income (loss), net of income tax

Foreign currency translation adjustment:
Translation adjustment arising during the period, net of income tax expense of $-, $4, $1, and $2, respectively		(14)		36		(10)		20

Cash flow hedges:
Change in fair value of derivatives, net of income tax expense of $-, $-, $-, and $1, respectively		—		—		—		3

Pension and postretirement adjustments:
Amortization of net actuarial gain/loss and prior service cost included in net periodic benefit costs, net of income tax expense of $-, $1, $1, and $2, respectively		2		1		3		4
Comprehensive income (loss)	$	418	$	82	$	625	$	(38)

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2021 Form 10-Q Page 3

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


	Additional Paid-In								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	104,286	$	791	(887)	$	(47)	$	2,507	$	(326)	$	5	$	2,930
Restricted stock issued	11		—											—
Issued under director and stock plans	219		7											7
Share based compensation expense			8											8
Shares of common stock used to satisfy tax withholding obligations				(3)		(1)								(1)
Share repurchases				(125)		(7)								(7)
Reissued for Employee Stock Purchase Plan ("ESPP")			(7)	301		14								7
Net income								430						430
Cash dividends declared on common stock ($0.20 per share)								(21)						(21)
Translation adjustment, net of tax										(14)				(14)
Pension and postretirement adjustments, net of tax										2				2
Balance at July 31, 2021	104,516	$	799	(714)	$	(41)	$	2,916	$	(338)	$	5	$	3,341

Balance at May 2, 2020	104,245	$	767	(23)	$	—	$	1,951	$	(404)	$	—	$	2,314
Restricted stock issued	13		—											—
Issued under director and stock plans	134		3											3
Share-based compensation expense			4											4
Reissued for ESPP				23		—								—
Net income								45						45
Translation adjustment, net of tax										36				36
Pension and postretirement adjustments, net of tax										1				1
Balance at August 1, 2020	104,392	$	774	—	$	—	$	1,996	$	(367)	$	—	$	2,403


	Additional Paid-In								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	103,693	$	779	(74)	$	(3)	$	2,326	$	(331)	$	5	$	2,776
Restricted stock issued	479		—											—
Issued under director and stock plans	344		11											11
Share based compensation expense			16											16
Shares of common stock used to satisfy tax withholding obligations				(195)		(11)								(11)
Share repurchases				(746)		(41)								(41)
Reissued for ESPP			(7)	301		14								7
Net income								632						632
Cash dividends declared on common stock ($0.40 per share)								(42)						(42)
Translation adjustment, net of tax										(10)				(10)
Pension and postretirement adjustments, net of tax										3				3
Balance at July 31, 2021	104,516	$	799	(714)	$	(41)	$	2,916	$	(338)	$	5	$	3,341

Balance at February 1, 2020	104,188	$	764	—	$	—	$	2,103	$	(394)	$	—	$	2,473
Restricted stock issued	67		—											—
Issued under director and stock plans	137		3											3
Share-based compensation expense			7											7
Shares of common stock used to satisfy tax withholding obligations				(23)		—								—
Reissued for ESPP				23		—								—
Net loss								(65)						(65)
Cash dividends declared on common stock ($0.40 per share)								(42)						(42)
Translation adjustment, net of tax										20				20
Change in cash flow hedges, net of tax										3				3
Pension and postretirement adjustments, net of tax										4				4
Balance at August 1, 2020	104,392	$	774	—	$	—	$	1,996	$	(367)	$	—	$	2,403

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2021 Form 10-Q Page 4

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Twenty-six weeks ended
	July 31,		August 1,
($ in millions)	2021		2020
From operating activities:
Net income (loss)	$	632	$	(65)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Non-cash impairment and other charges		45		31
Non-cash gains		(314)		—
Depreciation and amortization		93		88
Deferred income taxes		67		22
Share-based compensation expense		16		7
Change in assets and liabilities:
Merchandise inventories		(163)		12
Accounts payable		139		291
Accrued and other liabilities		(12)		142
Insurance receivable for inventory loss		8		—
Other, net		(109)		78
Net cash provided by operating activities		402		606
From investing activities:
Capital expenditures		(87)		(83)
Minority investments		(78)		(8)
Proceeds from sale of property		3		—
Insurance proceeds related to loss on property and equipment		3		—
Net cash used in investing activities		(159)		(91)
From financing activities:
Dividends paid on common stock		(42)		(42)
Purchase of treasury shares		(41)		—
Proceeds from exercise of stock options		10		—
Treasury stock reissued under employee stock plan		7		—
Shares of common stock repurchased to satisfy tax withholding obligations		(11)		—
Payment of obligations under finance leases		(1)		—
Payment of revolving credit agreement costs		(1)		(4)
Proceeds from common stock issued under employee stock plan		—		2
Proceeds from the revolving credit facility		—		330
Repayment of the revolving credit facility		—		(330)
Net cash used in financing activities		(79)		(44)
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash		(1)		(3)
Net change in cash, cash equivalents, and restricted cash		163		468
Cash, cash equivalents, and restricted cash at beginning of year		1,718		942
Cash, cash equivalents, and restricted cash at end of period	$	1,881	$	1,410

Cash paid during the year:
Interest	$	6	$	7
Income taxes	$	229	$	11

Non-cash investing activities:
Cash paid for amounts included in measurement of lease liabilities	$	358	$	279
Right-of-use assets obtained in exchange for operating lease obligations	$	171	$	135
Assets obtained in exchange for finance lease obligations	$	4	$	4

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2021 Form 10-Q Page 5

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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	$	1,817	$	1,388	$	3,437	$	2,202
Direct-to-customers		458		689		991		1,051
Total sales	$	2,275	$	2,077	$	4,428	$	3,253

Second Quarter 2021 Form 10-Q Page 6

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Sales disaggregated based upon geographic area is presented in the table below. Sales are attributable to the geographic area in which the sales transaction is fulfilled.