1 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): August 18, 1999 - -------------------------------------------------------------------------------- VENATOR GROUP, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York No. 1-10299 13-3513936 - ---------------------------- ----------- ------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 233 Broadway, New York, New York 10279-0003 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 553-2000 --------------
2 Item 5. Other Events. On August 18, 1999, the Registrant reported earnings for the second quarter ended July 31, 1999. (See Exhibit 99, which, in its entirety, is incorporated herein by reference.) Item 7. Financial Statements and Exhibits. (c) Exhibits In accordance with the provisions of Item 601 of Regulation S-K, an index of exhibits is included in this Form 8-K on page 3. SIGNATURES 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 being hereunto duly authorized. VENATOR GROUP, INC. (Registrant) Date: August 19, 1999 By: /s/ Bruce L. Hartman --------------------- Bruce L. Hartman Senior Vice President and Chief Financial Officer - 2 -
3 VENATOR GROUP, INC. INDEX OF EXHIBITS FURNISHED IN ACCORDANCE WITH THE PROVISIONS OF ITEM 601 OF REGULATION S-K Exhibit No. in Item 601 of Regulation S-K Description - ----------------------- ----------- 99 News Release dated August 18, 1999 - 3 -
1 Exhibit 99 NEWS RELEASE CONTACT: Juris Pagrabs Vice President, Investor Relations Venator Group, Inc. (212) 553-7017 VENATOR GROUP REPORTS SECOND QUARTER RESULTS NEW YORK, New York, August 18, 1999- Venator Group, Inc. (NYSE: Z) today reported results for the 13-week period ended July 31, 1999. Sales for the 13 weeks were $1,063 million compared with $1,043 million in the year-earlier period. For the 26-weeks sales were $2,142 million versus $2,101 million for the same period a year ago. Comparable-store sales for both the quarter and year-to-date periods were flat. As previously announced, the Company is exiting eight non-core businesses. Excluding the impact of this restructuring charge (noted below) and the operating losses of these businesses totaling $76 million ($46 million after-tax), the Company reported second quarter income from continuing operations of $5 million, or $0.04 per share, versus $10 million, or $0.07 per share, a year ago. For the first six months of 1999, the Company reported income from continuing operations (excluding the charge and operating losses noted above) of $3 million, or $0.02 per share, compared with $23 million, or $0.17 per share, last year. INCLUDING THE RESTRUCTURING, THE cOMPANY REPORTED A NET LOSS FOR THE SECOND QUARTER OF $31 MILLION, OR $0.23 PER SHARE, AND A NET LOSS OF $42 MILLION, OR $0.31 PER SHARE, FOR THE FIRST SIX MONTHS OF 1999. THE SECOND QUARTER NET LOSS INCLUDES $10 MILLION, OR $0.07 PER SHARE, OF INCOME FROM DISCONTINUED OPERATIONS REFLECTING FAVORABLE RESULTS TO DATE IN THE DISPOSITION OF SPECIALTY FOOTWEAR PROPERTIES. "While the results of the second quarter reflect the impact of the strategic decision to dispose of non-core businesses that were previously announced, we are encouraged to see improving athletic footwear trends, particularly at Foot Locker Worldwide, and most recently at Champs Sports," stated Dale Hilpert, President and Chief Executive Officer. "Although the environment continues to be competitive, exclusive and proprietary product, such as the Tuned Air running shoe and Uptempo basketball shoe, continues to drive our sales." "Sales performance at remodeled and relocated stores continues to be very encouraging," continued Mr. Hilpert. "Comparable-store sales for remodeled and relocated stores opened during 1998 through the second quarter of 1999 are up 19.2 percent at Foot Locker U.S., 9.6 percent at Lady Foot Locker, 17.4 percent at Kids Foot Locker, 36.0 percent at Foot Locker International and 51.3 percent at Afterthoughts." Gross margins (excluding the inventory charge noted above), as a percentage of sales, declined 270 basis points to 26.7% for the quarter, reflecting primarily increased occupancy costs relating to new real estate compared to last year. While gross margins, excluding occupancy costs, during the quarter improved at the Northern Group and Afterthoughts, they declined at the Athletic Group. Continued competitive pressure negatively impacted athletic gross margins, particularly at Champs Sports, as inventories were aggressively marked down to enhance its competitiveness during the upcoming back-to-school and holiday selling periods. Merchandise inventories were below plan, decreasing 18% to $812 million (at cost) compared to $995 million a year ago, reflecting a 26% decrease in inventories per square foot. The Company's improvement in managing its inventories, together with a lower capital expenditure program, reduced short-term debt, net of
2 cash, by $184 million compared to last year. As the Company moves into the fall and winter seasons, it expects aggregate inventories to continue to be below last year's reported levels. Selling, general and administrative expenses, as a percentage of sales, decreased 90 basis points to 23.4% for the period, reflecting continued tight cost controls at both the corporate and divisional levels. Included in selling, general and administrative expenses is approximately $20 million relating to the eight businesses. During the quarter the Company recorded in other income $23 million of gains resulting primarily from the sale of two properties and recognized $2 million of the deferred gain resulting from the 1998 sale and lease-back of its former corporate headquarters building. This is in addition to the $5 million of deferred gain relating to the building recorded in the first quarter. This compares to other income of $19 million recorded in the first six months a year ago, which resulted from the sale of its former six-store nursery chain. The Company opened 49 stores and remodeled 82 stores during the quarter. The Company also closed 83 stores to end the quarter with 5,915 stores in 15 countries in North America, Europe, Australia, and Asia. Details of the restructuring charge: o Restructuring charges of $52 million ($32 million after-tax) associated primarily with leasehold and real estate disposition expenses. o Inventory markdowns of $12 million ($7 million after-tax), which are included in cost of sales. o Quarterly and six months after-tax operating losses from the eight businesses totaling $7 million ($0.05 per share) and $16 million ($0.12 per share), respectively. Disclosure Regarding Forward-Looking Statements This press release contains forward-looking statements, which reflect management's current views of future events and financial performance. These forward-looking statements are based on many assumptions and factors including the effects of currency fluctuations, consumer preferences, economic conditions world-wide and other factors detailed in the Company's filings with the Securities and Exchange Commission. Any changes in such assumptions or factors could produce significantly different results.
3 VENATOR GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share amounts) 13 Weeks Ended 26 Weeks Ended ---------------------------------- --------------------------------- (unaudited) July 31, 1999 August 1, July 31, 1999 August 1, 1998 1998 --------------- --------------- -------------- --------------- Sales $1,063 $1,043 $2,142 $2,101 Costs and expenses: Cost of sales * 791 736 1,582 1,484 Selling, general and administrative 249 254 506 525 expenses Depreciation and amortization 46 36 91 70 Restructuring charge 52 - 52 - Interest expense, net 17 7 28 17 Other income (25) - (31) (19) ---------------- ---------------- ---------------- ---------------- 1,130 1,033 2,228 2,077 ---------------- ---------------- ---------------- ---------------- Income (loss) from continuing operations before income taxes (67) 10 (86) 24 Income tax expense (benefit) (26) 4 (34) 10 ---------------- ---------------- ---------------- ---------------- Income (loss) from continuing operations (41) 6 (52) 14 Income (loss) from discontinued operations, net of income tax expense (benefit) of $7, $(11), $7 and $(20), respectively 10 (19) 10 (32) ---------------- ---------------- ---------------- ---------------- Net loss $ (31) $ (13) $ (42) $ (18) ================ ================ ================ ================ Diluted Earnings Per Share: Income (loss) from continuing operations $(0.30) $ 0.04 $ (0.38) $ 0.10 Income (loss) from discontinued operations 0.07 (0.13) 0.07 (0.23) ================ ================ ================ ================ Net loss $(0.23) $(0.09) $ (0.31) $(0.13) ================ ================ ================ ================ Weighted-average common shares Outstanding assuming dilution 137.3 136.0 137.0 136.2 * Includes $12 million for inventory markdowns related to businesses held for disposal for both the 13 and 26 weeks ended July 31, 1999.
4 VENATOR GROUP, INC. SUPPLEMENTAL INFORMATION (In millions) 13 Weeks Ended 26 Weeks Ended ---------------------------------- ---------------------------------- (unaudited) July 31, 1999 August 1, 1998 July 31, 1999 August 1, 1998 --------------- ---------------- ---------------- ---------------- SALES BY SEGMENT: Athletic Group $ 874 $ 870 $1,788 $1,769 Northern Group 86 85 155 159 All Other 52 45 102 88 --------------- ---------------- ---------------- ---------------- 1,012 1,000 2,045 2,016 Disposed and held for disposal 51 43 97 85 --------------- ---------------- ---------------- ---------------- Total $1,063 $1,043 $2,142 $2,101 =============== ================ ================ ================ OPERATING RESULTS BY SEGMENT: Athletic Group $ 14 $ 38 $ 43 $ 87 Northern Group (6) (7) (22) (16) All Other 5 - 10 (2) --------------- ---------------- ---------------- ---------------- 13 31 31 69 Disposed and held for disposal (11) (7) (26) 4 =============== ================ ================ ================ Total $ 2 $ 24 $ 5 $ 73 =============== ================ ================ ================
5 VENATOR GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) July 31, 1999 August 1, 1998 (unaudited) (unaudited) ---------------- ---------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 66 $ 1 Merchandise inventories 812 995 Net assets of discontinued operations 105 621 Assets held for disposal 101 - Other current assets 164 217 ---------------- ---------------- 1,248 1,834 Property and equipment, net 941 787 Deferred tax assets 354 334 Other assets 256 280 ---------------- ---------------- $ 2,799 $ 3,235 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt $ 332 $ 451 Accounts payable and accrued liabilities 599 605 Current portion of long-term debt and obligations under capital leases 206 20 ---------------- ---------------- 1,137 1,076 Long-term debt and obligations under capital leases 313 509 Other liabilities 349 387 SHAREHOLDERS' EQUITY 1,000 1,263 ---------------- ---------------- $ 2,799 $ 3,235 ================ ================ -XXX-