UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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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. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 19, 2022, Foot Locker, Inc. (the “Company”) issued a press release (the “Press Release”) announcing its second quarter 2022 financial and operating results. A copy of the Press Release is furnished as Exhibit 99.1 to this Current Report on Form 8-K, which, in its entirety, is incorporated herein by reference.
The Company is hosting a conference call on August 19, 2022 to discuss its second quarter 2022 financial and operating results, during which the Company will provide an update on the business.
The Company is making reference to financial measures not presented in accordance with U.S. generally accepted accounting principles (“GAAP”) in the Press Release, investor presentation concerning its second quarter 2022 financial and operating results (the “Investor Presentation”), and conference call. A reconciliation of these non-GAAP financial measures to the nearest comparable GAAP financial measures is contained in the Press Release. The Company believes these non-GAAP financial measures provide useful information to investors because they allow for a more direct comparison of its second quarter 2022 performance to its performance in the comparable prior-year period. The non-GAAP financial measures are provided in addition to, and not as an alternative to, the Company’s reported results prepared in accordance with GAAP. A reconciliation to GAAP is provided in the Condensed Consolidated Statements of Operations.
The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 7.01. Regulation FD Disclosure.
In conjunction with the Press Release, the Company also made available the Investor Presentation. The Investor Presentation, which is available under the “Investor Relations” section of the Company’s corporate website, located at investors.footlocker-inc.com, is included as Exhibit 99.2 to this Current Report on Form 8-K, which, in its entirety, is incorporated herein by reference. Information on the Company’s corporate website is not, and will not be deemed to be, a part of this Current Report on Form 8-K or incorporated into any other filings the Company may make with the U.S. Securities and Exchange Commission.
The information contained in Item 7.01 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference into any filing under the Securities Act, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits. |
| Exhibit No. | Description |
| 99.1 | Press Release, dated August 19, 2022. |
| 99.2 | Investor Presentation, dated August 19, 2022. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FOOT LOCKER, INC. | ||
| Date: August 19, 2022 | By: | /s/ Andrew E. Page |
|
Name: Andrew E. Page Title: Executive Vice President and | ||
Exhibit 99.1
N E W S R E L E A S E
| Contact: Robert Higginbotham | |
| Vice President, Investor Relations | |
| robert.higginbotham@footlocker.com | |
| (212) 720-4600 |
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 |
NEW YORK, NY, August 19, 2022 – 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 16.4% above levels from 2019.”
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 $94 million, or $0.99 per share, for the 13 weeks ended July 30, 2022, compared with net income of $430 million, or $4.09 per share, for the corresponding prior-year period.
On a non-GAAP basis, the Company earned $1.10 per share, compared with non-GAAP earnings of $2.09 per share in the prior-year period. Please see the GAAP to non-GAAP reconciliation below.
Second quarter comparable-store sales decreased by 10.3% versus record sales levels from last year. Total sales decreased by 9.2%, to $2,065 million, compared with sales of $2,275 million in the second quarter of 2021. Excluding the effect of foreign exchange rate fluctuations, total sales for the second quarter decreased by 6.1%.
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.
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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 $227 million, or $2.36 per share on a GAAP basis, compared with $632 million, or $6.02 per share, for the corresponding period of 2021. On a non-GAAP basis, earnings per share for the six-month period totaled $2.71, compared to $4.05 per share in the prior year period in 2021. Year-to-date sales were $4,240 million, a decrease of 4.2% compared to the sales of $4,428 million in the corresponding six months of 2021. Year-to-date, comparable store sales decreased 6.2%, while total year-to-date sales, excluding the effect of foreign currency fluctuations, decreased by 1.7%.
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
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 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 | ~$214 million | ~$213 million | |
| Interest | ~$20 million | ~$20 million | |
| Tax Rate (Non-GAAP) | 29% to 30% | 30.0% to 30.5% | |
| Non-GAAP EPS | Upper end of $4.25-$4.60 | $4.25-$4.45 | Lower end of original range |
| Capital Expenditures | Up to $275 million | Up to $275 million |
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.
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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.
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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 $17 million ($12 million, after tax or $0.12 per share), $27 million ($20 million after tax or $0.19 per share), and $27 million ($20 million or $0.21 per share) for the second, third, and fourth quarters of 2021, respectively. For the full year, that represented income of $71 million ($52 million after tax or $0.50 per share) and was primarily related to our investment in Retailors, Ltd. Amounts recorded prior to 2021 were not significant. Non-GAAP financial measures that will be presented will exclude (i) minority investments, (ii) impairments and other charges, and (iii) certain tax matters that we believe are nonrecurring or unusual in nature.
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.
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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 $3, $9, $5, and $10 million, respectively (2) | 9 | 27 | 13 | 30 | ||||||||
| Other income / expense, net of income tax (expense)/benefit of $(3), $(84), $3 and $(84) million, respectively (3) | (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 $17 million of income ($12 million after tax or $0.12 per share) in each period. |
| (2) | For the second quarter of 2022, impairment and other charges included $9 million of transformation consulting, $1 million of acquisition integration costs, and $2 million of impairment of long-lived assets and right-of-use assets and accelerated tenancy charges. For year-to-date 2022, impairment and other charges included $10 million of transformation consulting, $3 million of acquisition integration costs, and $5 million of impairment of long-lived assets and right-of-use assets and accelerated tenancy charges. |
For the second quarter of 2021, impairment and other charges included $39 million of impairment of long-lived assets and right-of-use assets and accelerated tenancy charges associated with the decision to exit Footaction stores and an additional $4 million in other lease-related termination costs. Partially offsetting these losses was $11 million of additional insurance recovery related to the prior year social unrest losses, $7 million of which is classified as impairment and other charges as it related to the book value of losses recorded in 2020, with $4 million recorded in other income.
Also included in the year-to-date period of 2021 is a $2 million charge related to one of our minority investments and charges of $2 million primarily related to severance costs in connection with the reorganization of certain support functions.
| (3) | Other income / expense for the second quarter of 2022 primarily consisted of an $18 million gain on the divestiture of the Team Sales business, partially offset by a $12 million loss on minority investments, primarily due to a change in fair value of the investment in Retailors, Ltd., a publicly-listed entity. The year-to-date 2022 amount also includes $24 million of additional losses on minority investments, primarily from Retailors, Ltd. |
For the second quarter and year-to-date 2021, other income included $316 million of gains on minority investments, primarily related to a higher valuation on our investment in GOAT and the fair value adjustment of Retailors, Ltd. Other income also included $4 million of insurance recoveries.
| (4) | In the second quarter of 2022, the Company recorded a $5 million charge related to the Company’s income tax reserves due to the resolution of a foreign tax settlement. |
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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 | |||
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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. |
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Exhibit 99.2
2 Disclosure Regarding Forward - Looking Statements This presentation contains “forward - looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amen ded, and Section 21E of the Exchange Act, as amended. The words “believe,” “expect,” “anticipate,” “plan,” "predict," “intend,” "seek," “foresee,” “should,” “would,” “could,” “attempt ,” “appears,” “forecast,” “outlook,” “estimate,” “project,” “potential,” “may,” “will,” “likely,” “guidance,” “goal,” “model,” “target,” “budget” and other similar expressions are intended to identify forw ard - looking statements, which are generally not historical in nature. Statements may be forward looking even in the absence of these particular words. Examples of forward - looking statements include, but are not limited to, statements regarding our financial position, business strategy, and other plans and objectives for our future operations, and generation of free cash flow . These forward - looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. The forward - looking statements contained in this pr esentation are largely based on our expectations for the future, which reflect certain estimates and assumptions made by our management. These estimates and assumptions reflect our best judg men t based on currently known market conditions, operating trends, and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain an d involve a number of risks and uncertainties that are beyond our control. As such, management’s assumptions about future events may prove to be inaccurate. For a more detailed descriptio n o f the risks and uncertainties involved, see “Risk Factors” in our most recently filed Annual Report on Form 10 - K and subsequent Quarterly Reports on Form 10 - Q. We do not intend to publicly u pdate or revise any forward - looking statements as a result of new information, future events, changes in circumstances, or otherwise. These cautionary statements qualify all forward - looki ng statements attributable to us, or persons acting on our behalf. Management cautions you that the forward - looking statements contained herein are not guarantees of future performance, and we ca nnot assure you that such statements will be realized or that the events and circumstances they describe will occur. Factors that could cause actual results to differ materially from th ose anticipated or implied in the forward - looking statements herein include, but are not limited to a change in the relationship with any of our key suppliers or the unavailability of premium products at competitive prices; a ch ange in negotiated volume discounts, cooperative advertising, and markdown allowances with any of our key suppliers, or the ability to cancel orders an d r eturn excess or unneeded merchandise; our ability to fund our planned capital investments; the impact of volatility in the financial markets or other global economic factors; difficulties in appropriately allocating capital and resources among our strategic opportunities; our ability to realize the expected benefits from recent acquisitions; business opportunities and expansion; i nve stments; expenses; dividends; share repurchases; liquidity; cash flow from operations; use of cash and cash requirements; borrowing capacity and use of proceeds; repatriation of cash to the Unite d S tates; supply chain issues, including delays in merchandise receipts and increasing cost pressure caused by higher oceanic shipping and freight costs; labor shortages; expectations rega rdi ng increased wages; inflation; consumer spending levels; the effect of governmental assistance programs; social unrest; the direct and indirect effects of all variants of the coronavirus pa ndemic (COVID - 19) on our business, including any adverse effects of the U.S. government’s COVID - 19 vaccine mandates; expectations regarding increasing global taxes; the impact of government regula tion, including changes in law; the impact of the adverse outcome of any material litigation against us or judicial decisions that affect us or our industry generally; the effects of wea ther; increased competition; the financial impact of accounting regulations and critical accounting policies; credit risk relating to the risk of loss as a result of non - performance by our cou nterparties ; and any other factors listed in the reports we have filed and may file with the SEC that are incorporated by reference herein. All written and oral forward - looking statements attributabl e to us are expressly qualified in their entirety by this cautionary statement. A forward - looking statement is neither a prediction nor a guarantee of future events or circumstances, and those futu re 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 presentation.
3 OUR MISSION: To fuel a shared passion for self - expression OUR VISION: To create unrivaled experiences for our consumers OUR POSITION: To be at the heart of the sport and sneaker communities
~800 bps above average Apparel and Accessories comps down LSD $0.99 GAAP EPS +52% year - over - year Well positioned with fresh inventory going into Back - to - School SECOND QUARTER 2022 HIGHLIGHTS - 10.3% Total sales +16.4% vs. 2019 Comp sales - 340 bps +160 bps vs. 2019 Gross margin $1.10 1H22 up >20% vs. 2019 Non - GAAP EPS High - singles Non - Nike sales (core banners) increased
Store Traffic Up low - doubles ASP (total) Down high - singles Units (total) Down high - singles Footwear Down low - doubles Apparel Down mid - singles Accessories Up low - doubles 2Q GLOBAL SALES DETAIL Down high - singles Down low - teens Down high - singles MAY JUNE JULY Note: data is on comp basis unless otherwise noted. All data is ex - WSS/atmos
MENS WOMENS KIDS OVERALL Down high - singles Down low - singles Down low - doubles Down mid - singles Down low - teens Down mid - singles Up >30% Down high - teens 2Q COMP DETAIL APPAREL FOOTWEAR Down low - teens
APAC +17.7% 2Q COMP DETAIL EMEA +4.5% Foot Locker US - LDD Foot Locker Canada +LSD Champs Sports - HT Kids Foot Locker - HT NA - 16.1% Foot Locker Europe +MSD Sidestep +LSD Asia Up ~30% Pacific +HT
GROSS MARGIN (% of sales) Key Drivers • Merchandise margin fell 260 bps on higher markdowns, supply chain costs, and larger mix of WSS/ atmos • Occupancy deleverage by 80 bps SG&A EXPENSES (%) of sales Down 340 bps vs. last year Up 160 bps vs. 2019 22.2% 18.6% 19.8% 21.9% Q2 2019 Q2 2020 Q2 2021 Q2 2022 30.1% 25.9% 35.1% 31.7% Q2 2019 Q2 2020 Q2 2021 Q2 2022 SECOND QUARTER 2022 MARGIN PERFORMANCE Up 210 bps vs. last year 30 bps vs. 2019 Key Drivers of deleverage • Labor costs • Marketing
2022 FINANCIAL OUTLOOK 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 Comp Sales Upper end of down 8% to 10% Down 8% to 9% Sq. Ft. 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 ~$214 million ~$213 million Interest ~$20 million ~$20 million Tax Rate (Non - GAAP) 29% to 30% 30.0% to 30.5% Non - GAAP EPS Upper end of $4.25 to $4.60 $4.25 to $4.45 Lower end of original range Capex Up to $275 million Up to $275 million
* Based on analysis of identified customers in North America excluding WSS and atmos High percentage of multi - unit baskets have multiple brands* 80% of our highest frequency shoppers buy multiple brands* Customers who buy Footwear from us >4x over two years BUY ~3 DIFFERENT BRANDS AND ARE >50% OF SALES (of identified customers) ~40% have multiple brands Of transactions that have more than one item CONSUMERS WANT CHOICE CUSTOMERS WANT CHOICE
FOOT LOCKER HAS SUPERIOR BRAND EQUITY IN MARKET Source: Instagram, Langston (1) Third - Party Specialty Retailers (2) Langston's Brand Health Index is a composite of several underlying metrics that address key aspects of a brand's health Instagram following well above peers Brand Health Index >20% higher than closest peers Top 4 Competing Banners (1) Langston U.S. Brand Health Index (2) 12.2 1.0 0.615 0.399 0.245 A B C D Instagram Followers (millions in the U.S.) Competing Banners (1) >5x the Top 4 competing banners combined >20% higher
WSS + ATMOS GROWTH AND MARGIN PROFILE • Growing revenue from >$600M in 2022 to ~$1Bn by 2024 • Doubling the store fleet to serve growing Hispanic population • 100% off - mall Real Estate strategy drives occupancy leverage • Growing revenue from ~$220M in 2022 to ~$300M by 2024 • Establishes footprint in critical Japanese sneaker market • Digitally led, globally recognized controlled brand Sales Growth Profile* ~20% Gross Margin 32 - 33% EBIT Margin 11 - 14% EBIT $ CAGR * ~40% Sales Growth Profile* ~15% Gross Margin 32 - 33% EBIT Margin 16 - 18% EBIT $ CAGR * ~20% • CAGR fiscal 2022 through fiscal 2024
4.2 4.0 3.6 3.2 2018 2019 2020 2021 Average Term Remaining (Total North America) 1 (1) Excludes atmos & WSS REAL ESTATE FLEXIBILITY AND GROWING OFF - MALL MIX 323 322 341 421 494 14% 15% 16% 21% 26% 0% 5% 10% 15% 20% 25% 30% 2018 2019 2020 2021 2022E % of Fleet Off Mall (Total North America) 2 Off Mall Count: (2) includes atmos & WSS since acquisition