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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 10, 2011

 

Foot Locker, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

New York

1-10299

13-3513936

(State or other Jurisdiction
of Incorporation)

(Commission File Number)

(I.R.S. Employer
Identification No.)

 

 

112 West 34th Street, New York, New York

10120

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code:  212-720-3700

Former Name/Address
(Former name or former address, if changed from last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 

 

Item 7.01.

Regulation FD Disclosure

          On March 10, 2011, Foot Locker, Inc. (the “Company”) management will be presenting at the Bank of America Merrill Lynch 2011 Consumer Conference in New York City. The related written presentation of the Company is furnished as Exhibit 99.1. A non-GAAP to GAAP reconciliation schedule for the non-GAAP measures referred to in the presentation is attached as Exhibit 99.2.

 

 

Item 9.01.

Financial Statements and Exhibits

 

 

(c)

Exhibits

 

 

99.1

Foot Locker, Inc. presentation slides

99.2

Non-GAAP to GAAP Reconciliation Schedule

SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

FOOT LOCKER, INC.
(Registrant)

 

 

 

 

Date: March 10, 2011

By:

/s/ Robert W. McHugh

 

 

 

 

 

 

Executive Vice President and

 

 

Chief Financial Officer

Exhibit 99.1


2011 Bank of America Merrill Lynch Consumer Conference

March 10, 2011



This presentation 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 expects will or may occur in the future,
including, but not limited to, such things as future capital expenditures, expansion, strategic
plans, 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 detailed in the Company’s filings with the Securities and Exchange
Commission, including the effects of currency fluctuations, customer demand, fashion trends,
competitive market forces, uncertainties related to the effect of competitive products and
pricing, customer acceptance of the Company’s merchandise mix and retail locations, the
Company’s reliance on a few key vendors for a majority of its merchandise purchases
(including a significant portion from one key vendor), unseasonable weather, further
deterioration of global financial markets, economic conditions worldwide, any changes in
business, political, and economic conditions due to the threat of future terrorist activities in
the United States or in other parts of the world and related U.S. military action overseas, the
ability of the Company to execute its business and strategic plans effectively with regard to
each of its business units, and risks associated with foreign global sourcing, including
political instability, changes in import regulations, and disruptions to transportation services
and distribution. 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.

Disclosure Regarding Forward-Looking Statements



Introduction

Strategic Vision

Strategic Plan

2010 Financial Results and Long-Term Objectives

Opportunities

Summary



Strategic Vision

To be the leading global retailer of
athletically inspired shoes and apparel



Strategic Plan

1.

Be the Power Merchandiser of athletic shoes and apparel with clearly defined Brand Banners

2.

Develop a compelling Apparel assortment

3.

Make our stores and internet sites Exciting Places to shop and buy

4.

Aggressively pursue Growth Opportunities

5.

Increase the Productivity of all of our assets

6.

Build on our industry leading Retail Team



Power Merchandiser

I.

Broaden our Range of athletic shoes and apparel to Reach More
Customers

II.

Strengthen our position with Leading Athletic Brands with strong
partnerships

III.

Develop powerful Marketing programs



Compelling Apparel Assortment

I.

Be a leader in Branded Athletic apparel in look and function

II.

Create a meaningful Private Label apparel business

III.

Strengthen our In-Store Merchandising of apparel



Exciting Places to Shop and Buy

I.

Capitalize on our strong customer service model

II.

Create a consistent, exciting shopping environment

III.

Connect our channels

IV.

Encourage new ideas



Growth Opportunities

I.

Expand our International position

II.

Build on our On-Line  leadership  

III.

Identify New Avenues for growth

IV.

Broaden our Reach for New Customers



Increase Productivity

I.

Rigorously manage our Expenses

II.

Improve our Inventory Turnover and Merchandise Flow

III.

Improve our Conversion Rate

IV.

Improve the Efficiency and Effectiveness of our operations



Industry Leading Retail Team

I.

Attract, Develop and Retain the best people in retail

II.

Build on our Sales Oriented and Customer Focused culture

III.

Strengthen the Selling and Service Skills of our stores organization



2009

2010

Sales ($ billion)

$4.9

$5.0

Sales/Avg. Gross Sq. Ft.

$333

$360

EBIT Rate*

2.8%

5.4%

Net Income Rate*

1.8%

3.4%

ROIC*

5.3%

8.3%

Long-Term

Objective

10.0%

$6.0

$400

8.0%

5.0%

Long-Term Financial Objectives

*Represents non-GAAP measures.  Results adjusted to exclude impairment, inventory write-down, restructuring and income tax charges.



Opportunities

Differentiate Brand Banners Further

Enhance Footwear and Apparel Assortments

Improve Operational Execution

Accelerate Growth Initiatives

Increase Productivity of Assets



Strategic Vision

To be the leading global retailer of athletically inspired shoes and
apparel

Strategic Plan

Doing what we do well---Better and more efficiently

Pursue new growth opportunities

Financial Objectives

“Stretch Goals” But Realistic and Achievable

Off to a good start

Significant strengths and opportunities provide solid  
foundation for Profit Growth

Positioned Well For 2011

Strategic Plan Summary



Exhibit 99.2

Non-GAAP to GAAP Reconciliation

          In March 2010, the Company announced a new strategic plan, which includes a series of operating initiatives and long-term financial objectives. We consider the following financial objectives in assessing our performance pursuant to the strategic plan:

 

 

 

 

§

Sales of $6 billion

 

§

Sales per gross square foot of $400

 

§

EBIT margin of 8 percent

 

§

Net income margin of 5 percent

 

§

Return on Invested Capital of 10 percent

          In the following tables, the Company has presented certain financial measures and ratios identified as non-GAAP. The Company believes this non-GAAP information is a useful measure to investors because it allows for a more direct comparison of the Company’s performance for 2010 as compared with 2009 and is useful in assessing the Company’s progress in achieving its long-term financial objectives noted above. The following represents a reconciliation of the non-GAAP measures:

 

 

 

 

 

 

 

 

 

 

2010

 

2009

 

 

 

 

 

 

 

(in millions)

 

Pre-tax income:

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes – Reported

 

$

257

 

$

73

 

Pre-tax amounts excluded from GAAP

 

 

 

 

 

 

 

Impairment of goodwill and other intangible assets

 

 

10

 

 

—

 

Impairment of assets

 

 

—

 

 

36

 

Reorganization costs

 

 

—

 

 

5

 

Store closing program

 

 

—

 

 

—

 

Money market impairment

 

 

—

 

 

—

 

Northern Group note impairment

 

 

—

 

 

—

 

 

 

 

 

Impairment and other charges

 

 

10

 

 

41

 

Inventory reserve – recorded within cost of sales

 

 

—

 

 

14

 

Money market realized gain – recorded within other income

 

 

(2

)

 

—

 

 

 

 

 

Total pre-tax amounts excluded

 

$

8

 

$

55

 

 

 

 

 

Income (loss) from continuing operations before income taxes – Adjusted

 

$

265

 

$

128

 

 

 

 

 

 

 

 

 

 

 

 

 

Calculation of EBIT:

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes – Reported

 

$

257

 

$

73

 

Interest expense, net

 

 

9

 

 

10

 

 

 

 

 

EBIT

 

$

266

 

$

83

 

 

 

 

 

EBIT margin %

 

 

5.3

%

 

1.7

%

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes – Adjusted

 

$

265

 

$

128

 

Interest expense, net

 

 

9

 

 

10

 

 

 

 

 

Adjusted EBIT

 

$

274

 

$

138

 

 

 

 

 

Adjusted EBIT margin %

 

 

5.4

%

 

2.8

%


 

 

 

 

 

 

 

 

Reconciliation of the non-GAAP measures, continued:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2010

 

2009

 

 

 

 

 

 

 

(in millions, except per
share amounts)

 

After-tax income:

 

 

 

 

 

 

 

Income (loss) from continuing operations – Reported

 

$

169

 

$

47

 

After-tax amounts excluded

 

 

4

 

 

34

 

Canadian tax rate changes excluded

 

 

—

 

 

4

 

 

 

 

 

Income (loss) from continuing operations after-tax – Adjusted

 

$

173

 

$

85

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income margin %

 

 

3.3

%

 

1.0

%

Adjusted Net income margin %

 

 

3.4

%

 

1.8

%

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

Income (loss) from continuing operations -Reported

 

$

1.07

 

$

0.30

 

Impairment and other charges

 

 

0.04

 

 

0.16

 

Inventory reserve

 

 

—

 

 

0.06

 

Money-market realized gain

 

 

(0.01

)

 

—

 

Canadian tax rate changes

 

 

—

 

 

0.02

 

 

 

 

 

Income from continuing operations - Adjusted

 

$

1.10

 

$

0.54

 

 

 

 

 

          When assessing Return on Invested Capital (“ROIC”), the Company adjusts its results to reflect its operating leases as if they qualified for capital lease treatment. Operating leases are the primary financing vehicle used to fund store expansion and, therefore, we believe that the presentation of these leases as capital leases is appropriate. Accordingly, the asset base and net income amounts in the calculation of ROIC are adjusted to reflect this. ROIC, subject to certain adjustments, is also used as a measure in executive long-term incentive compensation. The closest GAAP measure is Return on Assets (“ROA”) and is also represented below. ROA increased to 5.9 percent as compared with 1.7 percent in the prior year reflecting the Company’s overall strong performance in 2010.

 

 

 

 

 

 

 

 

 

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

ROA (1)

 

 

5.9

%

 

1.7

%

ROIC %(2)

 

 

8.3

%

 

5.3

%

 

 

 

 

 

 

 

(1)

Represents income (loss) from continuing operations of $169 million and $47 million divided by average total assets of $2,856 million and $2,847 million for 2010 and 2009, respectively.

 

 

 

 

(2)

See below for the calculation of ROIC.


 

 

 

 

 

 

 

 

 

 

2010

 

2009

 

 

 

 

 

 

 

(in millions)

 

Adjusted EBIT

 

$

274

 

$

138

 

+ Rent expense less depreciation on capitalized operating leases (3)

 

 

156

 

 

156

 

- Adjusted income tax expense (3)

 

 

(153

)

 

(104

)

 

 

 

 

= Adjusted return after taxes

 

$

277

 

$

190

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total assets

 

$

2,856

 

$

2,847

 

- Average cash, cash equivalents and short-term investments

 

 

(642

)

 

(499

)

- Average non-interest bearing current liabilities

 

 

(461

)

 

(425

)

- Average merchandise inventories

 

 

(1,048

)

 

(1,079

)

+ Average estimated asset base of capitalized operating leases (3)

 

 

1,443

 

 

1,500

 

+ 13-month average merchandise inventories

 

 

1,177

 

 

1,268

 

 

 

 

 

= Average invested capital

 

$

3,325

 

$

3,612

 

 

 

 

 

 

 

 

 

 

 

 

 

ROIC %

 

 

8.3

%

 

5.3

%

 

 

 

 

(3)

The determination of the capitalized assets and the adjustments to income have been calculated on a lease-by-lease basis and have been consistently calculated in each of the years presented above. The adjusted income tax expense represents the tax on adjusted pre-tax return.