1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [X] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 Venator Group, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, of other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: - -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- (5) Total fee paid: - -------------------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount previously paid: - -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: - -------------------------------------------------------------------------------- (3) Filing Party: - -------------------------------------------------------------------------------- (4) Date Filed: - -------------------------------------------------------------------------------- 2 [VENATOR GROUP LOGO] Foot Locker Lady Foot Locker Kids Foot Locker Foot Locker International Champs Sports Eastbay Colorado Northern Reflections Northern Traditions Northern Elements Northern Getaway Afterthoughts San Francisco Music Box Randy River Weekend Edition 1 3 Discussion Overview ================================================================================ - - Venator's Board and management commitment to build and deliver value for our shareholders - Business strategy and repositioning of Venator Group - Corporate governance and compensation structures - Interaction with Greenway Partners [VENATOR GROUP LOGO] 2 4 The Situation (12/94) - The Plan ================================================================================ - - The Situation: - Financial pressures - High cost structure - Lack of inventory management and control - Over-invested in non-strategic, underperforming assets - Broken infrastructure - Ineffective organization, deficient skills - - The Plan: - Significantly improve financial position - Strengthen global organization - Introduce aggressive inventory management - Implement overhead & selling cost reduction - Consolidate logistics / distribution - Initiate active asset management - Institutionalize planning discipline [VENATOR GROUP LOGO] 3 5 Repositioning Progress Continues ================================================================================ '95 - '98 INITIATIVES - - Divest non-core businesses and assets RESULTS - - Eliminated 27 formats - - Sold and closed 3,866 stores - - Sold FWW Germany - $563 MM - - Sold 233 Broadway - $138 MM - - Closed 400 store FWW division - - Closed 500 specialty footwear division - - Generated $1 billion from asset sales [VENATOR GROUP LOGO] 4 6 Repositioning Progress Continues ================================================================================ 27 Formats Eliminated! [VENATOR GROUP LOGO] 5
US 4/95 The Rx Place 5/95 Kids Mart/Little Folk 3/96 Drug Mart 5/96 Accessory Lady 4/97 Basics 7/97 FW Woolworth 12/97 Best of Times 3/98 Garden Centers 4-98 Randy River 4-98 Eagle Rock 9/98 Kinney US 9/98 Footquarters Germany 6/96 New Yorker Sud 8/96 Lady Plus 10/96 Rubin 2/97 Moderna 9/98 FWW Germany Australia 3/97 Gallery Hong Kong 4/97 Foot Locker Mexico 8/97 Foot Locker 12/97 FW Woolworth Canada 7/95 Karuba 7/95 Canary Islands 10/96 Silk & Satin 6/97 Kinney Leased Dept. 4/98 Kinney Canada 5/98 Ashbrooks 7 Repositioning Progress Continues ================================================================================ '95 - '98 INITIATIVES - - Focus business on core specialty concepts RESULTS - - Designed 7 new prototypes - - Remodel sales comps: - Foot Locker US +15% - Lady Foot Locker +9% - Kids Foot Locker +25% - Foot Locker CN +25% - - Converted 155 FWW locations - - Acquired Eastbay - - Acquired Koenig, Athletic Fitters - - Open/remodel over 2,300 stores [VENATOR GROUP LOGO] 6 8 Repositioning Progress Continues ================================================================================ '95 - '98 INITIATIVES - - Reinvest in our core businesses RESULTS - - Enhanced competitiveness in our market place: - New stores $300 MM - Remodels $290 MM - Info./Log. $200 MM - Maintenance $90 MM - Acquisitions $180 MM '95 - '98 INITIATIVES - - Improve balance sheet and financial condition RESULTS - - Reduced net debt from $1.2B to $570 MM - - Reduced aged inventory - - Reduced SG&A by $400 M [VENATOR GROUP LOGO] 7 9 Repositioning Progress Continues ================================================================================ '95 - '98 INITIATIVES - - Improve infrastructure and merchandising systems: Logistics, I/S, financial reporting RESULTS - - Completed DC consolidation - - Implemented People Soft I/S systems - - Redesigned (M2K) merchandising process '95 - '98 INITIATIVES - - Enhance merchandise assortments RESULTS - - Introduced proprietary branded product - - Created exclusive product capability/organization - - Launched Internet commerce [VENATOR GROUP LOGO] 8 10 Progress: Rebuilt Corporate Team ================================================================================ [VENATOR GROUP LOGO] 9
Title Name Prior Experience - -------------------------- ------------------------- --------------------------- President & COO Dale Hilpert Payless Shoe Source SVP Asset Management Jeff Branman Financo / First Boston SVP Real Estate John DeWolf Disney / The Limited SVP Finance & CFO Bruce Hartman May Department Stores Co. VP Information Systems Ron Gaston Fabric-Centers of America VP Real Estate Jeff Burke Barnes & Noble VP Organization & Devel. Mitch Kosh Federated Dept. Stores VP Strategic Planning & Analysis Steve Hanon PepsiCo, Inc. VP Merchandising Operations Maryann McGeorge Federated Dept. Stores VP Investor Relations Juris Pagrabs OfficeMax VP Logistics & Distribution Richard Price Zellerbach 11 Progress: Rebuilt Operating Teams ================================================================================ [VENATOR GROUP LOGO] 10
Title Name Prior Experience - -------------------------- ------------------------- --------------------------- FOOT LOCKER U.S. President Tim Finn Foot Locker International SVP Marketing Hilary Chasin Petrie Stores SVP Merch. Planning John Disa Casual Corner GMM Kids Foot Locker Joe Berk Country Seat CHAMPS President & CEO Rick Mina Foot Locker Europe SVP Stores Jon Chittenden Stylco - Foot Locker and Champ Div. SVP Marketing Ian Gomar Starter SVP Human Resources Jeff Dentz Horace Small VP Product Development Reid Worth Patagonia 12 Repositioning Progress Continues ================================================================================ [PIE CHART] [PIE CHART] [VENATOR GROUP LOGO] 11
1994 BUSINESS MIX 1998 BUSINESS MIX Athletic Group 39% Athletic Group 82% General Merch 36% Northern Group 9% Specialty Footwear 9% All other 9% Northern Group 4% All other 12% 13 Global Sporting Goods Retail Market ================================================================================ $136 BILLION INDUSTRY Venator Athletic Group 2.7% of Industry $3.7 Billion [PIE CHART] [VENATOR GROUP LOGO] 12
CLOTHING 44% $60 Billion EQUIPMENT 35% $48 Billion FOOTWEAR 21% $28 Billion 14 U.S. Sporting Goods Retail Market ================================================================================ $70 BILLION INDUSTRY Venator Athletic Group 4.7% of Industry $3.3 Billion [PIE CHART] [VENATOR GROUP LOGO] 13
CLOTHING 49% $34 Billion EQUIPMENT 30% $21 Billion FOOTWEAR 21% $15 Billion 15 U.S. Athletic Footwear Market Growth, '95-'98 ================================================================================ [BAR GRAPH] ANNUAL % CHANGE IN REVENUE Source: The NPD Group [VENATOR GROUP LOGO] 14
1995 7.1 1996 5.9 1997 4.6 1998 -6.3 16 Athletic Industry Profitability, '95-'98 ================================================================================ [BAR GRAPH] OPERATING PROFIT % OF SALES Note: Peer Group includes: Footaction, Finish Line, Just for Feet, Sports Authority and Athlete's Foot Source: SEC Filings, Venator Analysis [VENATOR GROUP LOGO] 15
1995 1996 1997 1998 Venator Group Athletic 10.5 13.2 10.4 0.5 Peer Group Composite 3.9 5.8 4.8 2.0 17 U.S. Athletic Footwear Market Share ================================================================================ Top 7 Retailers Represent 40% Market Share! [PIE CHART] - - Sq. footage 5 yr. CAGR: 11% - - Sales (industry) 5 yr. CAGR: 5% to 6% - - 1998 Sales (industry) declined (6.3%) [VENATOR GROUP LOGO] 16
Small Independent Operations: Local 61% Venator Athletic Group: Z 16% JCP 6% FEET 5% F. Action 4% TSA 3% FINL 3% A. Foot 2% 18 Athletic Market Challenged in 1998 ================================================================================ EXTERNAL - INDUSTRY RELATED ISSUES - - Fashion shift away from high-end athletic footwear - Created mix-shift to lower price-point product - - Oversupply of close-out product - - Weak branded and licensed apparel sales - - NBA lockout depressed basketball footwear sales - - Lack of Asian tourism impacted key international cities [VENATOR GROUP LOGO] 17 19 Athletic Market Challenged in 1998 ================================================================================ INTERNAL - COMPANY RELATED ISSUES - - Declining sales productivity resulted in reduced margins - - Delays in new store openings - Escalating inventories created increased markdowns - - Burdened real estate with 155 FWW properties - - Accelerated capital expenditures to fund new prototypes and FWW conversions [VENATOR GROUP LOGO] 18 20 1999 - Strategic Priorities for Growth ================================================================================ GENERATE PROFITABLE TOP-LINE SALES (IMPROVE GROSS MARGINS) - - Implement M2K merchandising process - Improve allocations by store - Reduce number of styles by 50% - Increase remaining SKU's three-fold - - Execute differentiating programs - Tuned Air, Champion, Nautica NST - Quick response styles - Speed to market - reduce buying lead times to reduce fashion risk and markdowns [VENATOR GROUP LOGO] 19 21 1999 - Strategic Priorities for Growth ================================================================================ GENERATE PROFITABLE TOP-LINE SALES (IMPROVE GROSS MARGINS) - - Increase product offering of opening price points - - Refocus the field organization to drive sales - - Exploit growth opportunities in the U.S. market - Women's and kids' markets - Street/neighborhood stores - - Continue to roll-out European growth strategy - New 250,000 sq. foot distribution facility [VENATOR GROUP LOGO] 20 22 1999 - Strategic Priorities for Growth ================================================================================ GENERATE PROFITABLE TOP-LINE SALES (IMPROVE GROSS MARGINS) Exciting Internet Opportunities eVenator! - - Expand e-commerce and direct channels by leveraging Eastbay's infrastructure - - Launch new subsidiary - eVENATOR - In-store fulfillment network (never out-of-stock) - Employment of in-store catalogs as line extensions - NFL catalog and Internet businesses - Eastbay becomes a subsidiary of eVenator [VENATOR GROUP LOGO] 21 23 1999 - Strategic Priorities for Growth ================================================================================ LIMIT CAPEX AND IMPROVE CAPITAL PRODUCTIVITY TO INCREASE CASH FLOW - - Reduce capital spending to $175 million - - Systematically reduce number of loss stores - - Derive highest and best use of Trophy properties - - Implement best-practice inventory management and receipt flow processes [VENATOR GROUP LOGO] 22 24 1999 - Strategic Priorities for Growth ================================================================================ REDUCE OPERATING EXPENSES BY $100 MM - - Reduce operating expenses at corporate and divisional levels - - Reduce corporate cost to 1% of sales by 2001 - - Leverage corporate shared services organization - Implement best practices and cross-divisional synergies [VENATOR GROUP LOGO] 23 25 Venator Today: Positioned For Growth ================================================================================ - - Compelling competitive/leadership position with strong brand name recognition - - Expanded merchandise opportunities - High-end, unique product exclusive - Private label products - apparel - Enhance moderate price-point business [VENATOR GROUP LOGO] 24 26 Venator Today: Positioned For Growth ================================================================================ - - Refined strategic focus - portfolio realignment - 1/3 of existing real estate has been upgraded - Women's and kids' markets are underserved - Street and neighborhood stores - Direct channels (catalogs and e-commerce) - Europe is growing faster than U.S. - - Excitement building: Olympics & NBA returning [VENATOR GROUP LOGO] 25 27 Venator Today: Stock Performance ================================================================================ Wall Street Recognizes our Progress! - - From $15.00 to high of $28.375 in 8/97 - - Retail peer group stock declined 55% from its high in 1998 - - Vendor industry group declined 36% from its high in 1998 - - Increased more than 85% since 1/29/99 - More than double our nearest industry peer - - Four analysts upgrade investment opinions - - New analyst initiates coverage on June 29, 1999 [VENATOR GROUP LOGO] 26 28 Venator Today: Corporate Governance ================================================================================ Nine out of eleven are Independent! - - Strong independent board - 7 joined in last 6 years - - World-class business leaders - Carter Bacot - recently retired Chairman of Bank of New York - Purdy Crawford - Chairman of Imasco - Phil Geier - Chairman of Interpublic - Jarobin Gilbert - CEO of DBSS Group - Allan Loren - CIO of American Express - Margaret MacKimm - former SVP of Kraft Foods - John Mackowski - former Chairman of Atlantic Mutual Ins. - Jim Preston - recently retired Chairman of Avon - Chris Sinclair - former Chairman Pepsi-Cola Company, a division of PepsiCo, Inc. [VENATOR GROUP LOGO] 27 29 Venator Today: Corporate Governance ================================================================================ - - Active Board participation - Regular meetings - at least 6 times per year - Very active committee schedule - - Changed Board compensation - Eliminated Board meeting fees in 1996 - Flat annual fee of $40,000 - Paid 1/2 in stock - option to increase - No additional perks - - Froze Directors' Retirement Plan in 1994 - Only four directors currently serving entitled [VENATOR GROUP LOGO] 28 30 Venator Today: Corporate Governance ================================================================================ - - Change in executive compensation - Moved to a "pay for performance" system corporate wide four years ago - More closely align with shareholders' interests - Greater portion of compensation "at risk" - Annual incentive plan based on operating results - Stock option program - heavily weighted - - Revised Rights Plan - More "shareholder friendly" - Qualified offers do not trigger the Rights Plan [VENATOR GROUP LOGO] 29 31 Venator Today: Greenway Proposals ================================================================================ - - Greenway proposals - previous 3 years - 1996 - Spin-off Foot Locker - Ignored financial impact - 1997 - Reinstate the dividend - Neglected the need to reinvest in business - 1998 - Sell Germany - We were in the process of preparing business for sale - - 4 years of restructuring - focus on business [VENATOR GROUP LOGO] 30 32 Venator Today: Greenway Proposals ================================================================================ - - Greenway proposals - current year - Change name back to Woolworth - ISS recommended and 80% of shares voted in favor of the change - Very costly and confusing - other businesses in several countries use the name - Our employees have embraced the name [VENATOR GROUP LOGO] 31 33 Venator Today: Greenway Proposals ================================================================================ - - Greenway proposals - current year - Eliminate the pill / shareholder approval - Recent stock volatility supports some form of Rights Plan - Board recently amended the plan to exclude qualified offers from triggering the Plan - Slate of four directors [VENATOR GROUP LOGO] 32 34 Venator Today: Greenway Proposals ================================================================================ - - Venator Group's nominees are world-class business leaders - Carter Bacot - former Chairman of Bank of New York - Purdy Crawford - Chairman of Imasco - Phil Geier - Chairman of Interpublic - Dale Hilpert - President and COO of Venator Group - - Greenway Partners nominees - Two are principals of Greenway Partners - One is an officer of a Company controlled by Greenway - One is a limited partner of Greenway [VENATOR GROUP LOGO] 33 35 [VENATOR GROUP LOGO] Foot Locker Lady Foot Locker Kids Foot Locker Foot Locker International Champs Sports Eastbay Colorado Northern Reflections Northern Traditions Northern Elements Northern Getaway Afterthoughts San Francisco Music Box Randy River Weekend Edition 34