FL Foot Locker Inc

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.” 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 herein 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 judgment 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 and 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.

 

We do not intend to publicly update 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-looking 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 cannot 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 those 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, including access to premium products, volume discounts, cooperative advertising, markdown allowances, or the ability to cancel orders or return merchandise; inventory management; our ability to fund our planned capital investments; execution of the Company's long-term strategic plan; a recession, volatility in the financial markets, and other global economic factors, including inflation; capital and resource allocation among our strategic opportunities; our ability to realize the expected benefits from acquisitions; business opportunities and expansion; investments; expenses; dividends; share repurchases; cash management; liquidity; cash flow from operations; access to credit markets at competitive terms; borrowing capacity under our credit facility; cash repatriation; supply chain issues; labor shortages and wage pressures; consumer spending levels; licensed store arrangements; the effect of certain governmental assistance programs; the success of our marketing and sponsorship arrangements; expectations regarding increasing global taxes; the effect of increased government regulation, compliance, and changes in law; the effect of the adverse outcome of any material litigation or government investigation that affects us or our industry generally; the effects of weather; ESG risks; increased competition; geopolitical events; the financial effects of accounting regulations and critical accounting policies; counterparty risks; and any other factors set forth in the section entitled “Risk Factors” of our most recent Annual Report on Form 10-K.

 

All written and oral forward-looking statements attributable 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 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. 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 for a discussion of certain risks relating to our business and any investment in our securities. 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.

 ​

  

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

*

The balance sheet at February 3, 2024 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 February 3, 2024.

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements. ​

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 ​

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

  

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

 

 

    ​

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

  

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

 

   

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

​

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 ​

 

 

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​

1. Summary of Significant Accounting Policies

 

Business

 

Foot Locker, Inc., together with its consolidated subsidiaries (“Foot Locker,” “Company,” “we,” “our,” and “us”), is a leading footwear and apparel retailer. We have integrated all available shopping channels, including stores, websites, apps, and social channels. Store sales are primarily fulfilled from the store’s inventory, but may also be shipped from any of our distribution centers or from a different store location if an item is not available at the original store. Direct-to-customer orders are generally shipped to our customers through our distribution centers but may also be shipped from any store or a combination of our distribution centers and stores depending on availability of particular items. We operate in North America, Europe, and Asia Pacific, representing our operating segments. We aggregate these operating segments into one reportable segment based upon their shared customer base and similar economic characteristics.

 

Basis of Presentation

 

The accompanying interim Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of the results expected for the year. Additionally, the results of operations for the period ended  May 4, 2024 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 the year.

 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in our 2023 Form 10-K.

 

There were no significant changes to the policies disclosed in Note 1, Summary of Significant Accounting Policies of our 2023 Form 10-K.

 

Recent Accounting Pronouncements

 

Other than the pronouncements disclosed in our 2023 Form 10-K, 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 by sales channel, as well as licensing revenue earned from our various licensed arrangements. Sales are attributable to the channel in which the sales transaction is initiated.

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Sales by Channel
Stores		$	1,554			$	1,613
Direct-to-customers			320				314
Total sales			1,874				1,927
Licensing revenue			5				4
Total revenue		$	1,879			$	1,931

 

First Quarter 2024 Form 10-Q Page 6

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

2. Revenue (continued)

 

Revenue is attributed to the country in which the transaction is fulfilled, and revenue by geographic area is presented in the following table.

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Revenue by Geography
United States		$	1,272			$	1,287
International			607				644
Total revenue		$	1,879			$	1,931

 

Sales by banner and operating segment are presented in the following table.

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Foot Locker		$	759			$	744
Champs Sports			267				328
Kids Foot Locker			183				167
WSS			160				150
North America			1,369				1,389
Foot Locker (1)			394				379
Sidestep			—				14
EMEA			394				393
Foot Locker			72				98
atmos			39				47
Asia Pacific			111				145
Total sales		$	1,874			$	1,927

 

(1)	Includes sales from 10 and 15 Kids Foot Locker stores operating in Europe for  May 4, 2024 and April 29, 2023, respectively.

    

Contract Liabilities

 

We sell gift cards which do not have expiration dates. Revenue from gift card sales is recorded when the gift cards are redeemed by customers. Breakage income is recognized as revenue in proportion to the pattern of rights exercised by the customer. The table below presents the activity of our gift card liability balance.

 

​		May 4,				April 29,
($ in millions)		2024				2023
Gift card liability at beginning of year		$	29			$	36
Redemptions			(39	)			(61	)
Breakage recognized in sales			(2	)			(4	)
Activations			35				56
Gift card liability		$	23			$	27

 

We elected not to disclose the information about remaining performance obligations since the amount of gift cards redeemed after 12 months is not significant.

 

First Quarter 2024 Form 10-Q Page 7

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

3. Segment Information

 

Foot Locker, Inc. operates one reportable segment. Division profit reflects income before income taxes, impairment and other, corporate expense, other (expense) income, net, and net interest expense.

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Division profit		$	43			$	104
Less: Impairment and other (1)			14				39
Less: Corporate expense (2)			11				4
Income from operations			18				61
Interest expense, net			(1	)			(1	)
Other (expense) income, net (3)			(4	)			(3	)
Income before income taxes		$	13			$	57

 ​

(1)	See Note 4, Impairment and Other for further detail.
(2)	Corporate expense consists of unallocated selling, general and administrative expenses, as well as depreciation and amortization related to our corporate headquarters, centrally managed departments, unallocated insurance and benefit programs, certain foreign exchange transaction gains and losses, and other items.
(3)	See Note 5, Other (Expense) Income, net.

4. Impairment and Other

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Impairment of long-lived assets and right-of-use assets		$	7			$	18
Legal claims			7				—
Transformation consulting			—				19
Reorganization costs			—				2
Total impairment and other		$	14			$	39

 

For the thirteen weeks ended May 4, 2024, we incurred $7 million of loss accrual for legal claims and $7 million of impairment of long-lived assets and right-of-use assets related to our decision to no longer operate, and to sublease, one of our larger unprofitable stores in Europe.

5. Other (Expense) Income, net

 

​		Thirteen weeks ended
		May 4,				April 29,
($ in millions)		2024				2023
Pension and postretirement net benefit expense, excluding service cost		$	(2	)		$	(2	)
Share of losses related to minority investments			(2	)			(1	)
Total other (expense) income, net		$	(4	)		$	(3	)

 

First Quarter 2024 Form 10-Q Page 8

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

6. Cash, Cash Equivalents, and Restricted Cash

 

The table below provides a reconciliation of cash and cash equivalents, as reported on our Condensed Consolidated Balance Sheets, to cash, cash equivalents, and restricted cash, as reported on our Condensed Consolidated Statements of Cash Flows.

 

​		May 4,				April 29,
($ in millions)		2024				2023
Cash and cash equivalents		$	282			$	313
Restricted cash included in other current assets			4				13
Restricted cash included in other non-current assets			31				33
Cash, cash equivalents, and restricted cash		$	317			$	359

 ​

Amounts included in restricted cash primarily relate to amounts held in escrow in connection with various leasing arrangements in Europe and deposits held in insurance trusts to satisfy the requirement to collateralize part of the self-insured workers’ compensation and liability claims.

7. Accumulated Other Comprehensive Loss

 

Accumulated other comprehensive loss (“AOCL”), net of tax, is comprised of the following:

 

​		May 4,				April 29,				February 3,
($ in millions)		2024				2023				2024
Foreign currency translation adjustments		$	(192	)		$	(155	)		$	(173	)
Hedge contracts			(3	)			(2	)			(2	)
Unrecognized pension cost and postretirement benefit			(190	)			(239	)			(191	)
​		$	(385	)		$	(396	)		$	(366	)

 ​

The changes in AOCL for the thirteen weeks ended May 4, 2024 were as follows:

 

​		Foreign				​				Items Related				​
​		Currency				​				to Pension and				​
​		Translation				Hedge				Postretirement				​
($ in millions)		Adjustments				Contracts				Benefits				Total
Balance as of February 3, 2024		$	(173	)			(2	)		$	(191	)		$	(366	)
​		​				​				​				​
OCI before reclassification			(19	)			2				—				(17	)
Reclassification of hedges, net of tax			—				(3	)			—				(3	)
Amortization of pension actuarial loss, net of tax			—				—				1				1
Other comprehensive (loss) / income			(19	)			(1	)			1				(19	)
Balance as of May 4, 2024		$	(192	)		$	(3	)		$	(190	)		$	(385	)

 

First Quarter 2024 Form 10-Q Page 9

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

7. Accumulated Other Comprehensive Loss (continued)

 

Reclassifications from AOCL for the thirteen weeks ended May 4, 2024 were as follows:

 

($ in millions)		​
Reclassification of hedge loss:
Cross-currency swap		$	(4	)
Income tax			1
Reclassification of hedges, net of tax		$	(3	)
​		​
Amortization of actuarial loss:		​
Pension benefits		$	2
Income tax			(1	)
Amortization of actuarial loss, net of tax		$	1
Total, net of tax		$	(2	)

 

8. Fair Value Measurements

 

Our financial assets and liabilities are recorded at fair value, using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value.

 

Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

($ in millions)		As of May 4, 2024												As of April 29, 2023
​		Level 1				Level 2				Level 3				Level 1				Level 2				Level 3
Assets
Available-for-sale security		$	—			$	6			$	—			$	—			$	6			$	—
Foreign exchange forward contracts			—				2				—				—				—				—
Cross-currency swap contract			—				9				—				—				—				—
Total assets		$	—			$	17			$	—			$	—			$	6			$	—
Liabilities
Contingent consideration		$	—			$	—			$	—			$	—			$	—			$	4
Foreign exchange forward contracts			—				—				—				—				1				—
Total liabilities		$	—			$	—			$	—			$	—			$	1			$	4

 

There were no transfers into or out of Level 1, Level 2, or Level 3 assets and liabilities for any of the periods presented.

 

Long-Term Debt

 

The fair value of long-term debt is determined by using model-derived valuations in which all significant inputs or significant value drivers are observable in active markets and, therefore, are classified as Level 2. The carrying value and estimated fair value of long-term debt were as follows:

 

		May 4,				April 29,
($ in millions)		2024				2023
Carrying value (1)		$	395			$	395
Fair value		$	321			$	339

 

(1)	The carrying value of debt as of both  May 4, 2024 and April 29, 2023, included $5 million of issuer’s discount and costs.

 

The carrying values of cash and cash equivalents, and other current receivables and payables approximate their fair value.

 

First Quarter 2024 Form 10-Q Page 10

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

9. Earnings Per Share

 

We account for earnings per share (“EPS”) using the treasury stock method. Basic EPS is computed by dividing net income for the period by the weighted-average number of common shares outstanding at the end of the period. Diluted earnings per share reflects the weighted-average number of common shares outstanding during the period used in the basic EPS computation plus dilutive common stock equivalents. The computation of diluted earnings per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on EPS. The computation of basic and diluted EPS is as follows:

 

​		Thirteen weeks ended
​		May 4,				April 29,
(in millions, except per share data)		2024				2023
Net income		$	8			$	36
Weighted-average common shares outstanding			94.7				93.7
Dilutive effect of potential common shares			0.6				1.4
Weighted-average common shares outstanding assuming dilution			95.3				95.1
​		​				​
Earnings per share - basic		$	0.09			$	0.39
Earnings per share - diluted		$	0.09			$	0.38
​		​				​
Anti-dilutive share-based awards excluded from diluted calculation			2.6				2.3

 

Performance stock units related to our long-term incentive programs of 1.8 million and 0.9 million have been excluded from diluted weighted-average shares for the periods ended May 4, 2024 and April 29, 2023, respectively. The issuance of these shares is contingent on our performance metrics as compared to the pre-established performance goals, which have not been achieved.

10. Pension

 

The components of net periodic pension benefit expense are presented in the table below. Service cost is recognized as part of SG&A expense, while the other components are recognized as part of Other (expense) income, net.

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Service cost		$	1			$	1
Interest cost			5				6
Expected return on plan assets			(5	)			(7	)
Amortization of net loss			2				3
Net benefit expense		$	3			$	3

 

11. Share-Based Compensation

 

Share-Based Compensation Expense

 

Total compensation expense, included in SG&A, and the associated tax benefits recognized related to our share-based compensation plans, was as follows:

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Options and employee stock purchase plan		$	1			$	1
Restricted stock units and performance stock units			5				1
Total share-based compensation expense		$	6			$	2
​		​				​
Tax benefit recognized		$	1			$	—

 

First Quarter 2024 Form 10-Q Page 11

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

11. Share-Based Compensation (continued)

 

Stock Options

 

As of May 4, 2024, there were 8,263,171 shares available for issuance under the 2007 Stock Incentive Plan. Effective in 2024, we no longer issue stock option grants. The table below provides activity for existing awards for the thirteen weeks ended May 4, 2024.

 

​

​

Weighted-

Weighted-

​

Number

Average

Average

​

of

Remaining

Exercise

​

Shares

Contractual Life

Price

​

(in thousands)

(in years)

(per share)

Options outstanding at the beginning of the year

2,738

​

$

48.23

Exercised

(239

)

​

21.60

Expired or cancelled

(259

)

​

53.85

Options outstanding at May 4, 2024

2,240

3.5

$

50.41

Options exercisable at May 4, 2024

1,926

2.7

$

52.60

 

The total fair value of options vested for the thirteen weeks ended May 4, 2024 and April 29, 2023 was $2 million and $4 million, respectively. The cash received from option exercises during the thirteen weeks ended May 4, 2024 and  April 29, 2023 was $5 million $4 million, respectively, and the related tax benefits realized from option exercises in both periods were not significant. 

 

The total intrinsic value of options exercised (the difference between the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) is presented below:

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Exercised		$	3			$	3

 

The aggregate intrinsic value for stock options outstanding, and outstanding and exercisable (the difference between our closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) is presented below:

 

​		May 4,				April 29,
($ in millions)		2024				2023
Outstanding		$	—			$	15
Outstanding and exercisable		$	—			$	13

 

As of May 4, 2024, there was $2 million of total unrecognized compensation cost related to nonvested stock options which is expected to be recognized over a remaining weighted-average period of 1.4 years.

​

First Quarter 2024 Form 10-Q Page 12

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

11. Share-Based Compensation (continued)

 

The table below summarizes information about stock options outstanding and exercisable at May 4, 2024.

 

​		Options Outstanding												Options Exercisable
​		​				Weighted-				​				​				​
​		​				Average				Weighted-				​				Weighted-
​		​				Remaining				Average				​				Average
Range of Exercise		Number				Contractual				Exercise				Number				Exercise
Prices		Outstanding				Life				Price				Exercisable				Price
​		(in thousands, except prices per share and contractual life)
$21.60 - $30.98			447				4.8			$	26.49				381			$	26.14
$36.49 - $46.64			541				6.3				40.83				293				42.21
$53.61 - $58.94			383				2.4				56.47				383				56.47
$62.02 - $72.83			869				1.6				65.98				869				65.98
​			2,240				3.5			$	50.41				1,926			$	52.60

 ​

Restricted Stock Units and Performance Stock Units

 

Restricted stock units (“RSU”) are awarded to certain officers, key employees of the Company, and nonemployee directors. Additionally, performance stock units (“PSU”) are awarded to certain officers and key employees in connection with our long-term incentive program. Each RSU and PSU represents the right to receive one share of our common stock, provided that the applicable performance and vesting conditions are satisfied. PSU awards also include a performance objective based on our relative total shareholder return over the performance period to a pre-determined peer group, assuming the reinvestment of dividends. The fair value of the market condition of our PSU awards is determined using a Monte Carlo simulation as of the date of the grant.  

 

Generally, RSU awards fully vest after the passage of time, typically over three years for employees and one year for nonemployee directors, provided there is continued service with the Company until the vesting date, subject to the terms of the award. PSU awards are earned only after the attainment of performance goals in connection with the relevant performance period. PSUs granted in 2024 vest after the attainment of the performance period, which is three years. Prior PSU grants vested after the attainment of the performance period and an additional one-year period. No dividends are paid or accumulated on any RSU or PSU awards. Compensation expense is recognized over the vesting period on a straight-line basis.

 

RSU and PSU activity for the thirteen weeks ended May 4, 2024 is summarized as follows:

 ​

​

​

Weighted-

Average

Weighted-

​

Number

Remaining

Average

​

of

Contractual

Grant Date

​

Shares

Life

Fair Value

​

(in thousands)

(in years)

(per share)

Nonvested at beginning of year

1,378

​

$

38.81

Granted

1,346

​

29.16

Vested

(417

)

​

52.23

Forfeited

(10

)

​

37.66

Nonvested at May 4, 2024

2,297

1.9

$

30.72

​

​

​

​

Aggregate value ($ in millions)

$

71

​

 

The total value of RSU and PSU awards that vested during the thirteen weeks ended May 4, 2024 and April 29, 2023 was $22 million and $21 million, respectively. As of May 4, 2024, there was $30 million of total unrecognized compensation cost related to nonvested awards.

​

First Quarter 2024 Form 10-Q Page 13

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

12. Legal Proceedings

 

Legal proceedings pending against the Company or its consolidated subsidiaries consist of ordinary, routine litigation, or pre-litigation demands, including administrative proceedings, incidental to the business of the Company or businesses that have been sold or discontinued by the Company in past years. These legal proceedings include commercial, intellectual property, customer, environmental, and employment-related claims.

 

We do not believe that the outcome of any such legal proceedings pending against the Company or its consolidated subsidiaries, as described above, would have a material adverse effect on our consolidated financial position, liquidity, or results of operations, taken as a whole, based upon current knowledge and taking into consideration current accruals. Litigation is inherently unpredictable. Judgments could be rendered or settlements made that could adversely affect the Company's operating results or cash flows in a particular period.

 

First Quarter 2024 Form 10-Q Page 14

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Business Overview

 

Foot Locker, Inc. is a leading footwear and apparel retailer that unlocks the "inner sneakerhead" in all of us. We have a strong history of sneaker authority that sparks discovery and ignites the power of sneaker culture through our portfolio of brands, including Foot Locker, Kids Foot Locker, Champs Sports, WSS, and atmos.  

 

Ensuring that our customers can engage with us in the most convenient manner for them whether in our stores, on our websites, or on our mobile applications, is a high priority for us. We use our omni-channel capabilities to bridge the digital world and physical stores, including order-in-store, buy online and pickup-in-store, and buy online and ship-from-store, as well as e-commerce. We operate websites and mobile apps aligned with the brand names of our store banners. These sites offer our largest product selections and provide a seamless link between our e-commerce experience and physical stores.

 

Store Count

 

At May 4, 2024, we operated 2,490 stores as compared with 2,523 and 2,692 stores at February 3, 2024 and April 29, 2023, respectively.

 

Licensed Operations

 

A total of 206 licensed stores were operating at May 4, 2024, as compared with 202 and 163 stores at February 3, 2024 and April 29, 2023, respectively, operating in the Middle East and Asia. These stores are not included in the operating store count above.

 

Results of Operations

 

We evaluate performance based on several factors, primarily the banner’s financial results, referred to as division profit. Division profit reflects income before income taxes, impairment and other charges, corporate expenses, non-operating income, and net interest expense.

 

The table below summarizes our results for the period.

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Sales		$	1,874			$	1,927
Licensing revenue			5				4
Total revenue		$	1,879			$	1,931
​		​				​
Operating Results		​				​
Division profit		$	43			$	104
Less: Impairment and other (1)			14				39
Less: Corporate expense (2)			11				4
Income from operations			18				61
Interest expense, net			(1	)			(1	)
Other (expense) income, net (3)			(4	)			(3	)
Income before income taxes		$	13			$	57

 

(1)	See the Impairment and Other section for further information.
(2)	Corporate expense consists of unallocated selling, general and administrative expenses as well as depreciation and amortization related to the Company’s corporate headquarters, centrally managed departments, unallocated insurance and benefit programs, certain foreign exchange transaction gains and losses, and other items.
(3)	Other (expense) income, net includes non-operating items, changes in fair value of minority interests measured at fair value or using the fair value measurement alternative, changes in the market value of our available-for-sale security, our share of earnings or losses related to our equity method investments, and net benefit expense related to our pension and postretirement programs excluding the service cost component. See the Other (expense) income, net section for further information.

 

 

Reconciliation of Non-GAAP Measures

 

In addition to reporting our financial results in accordance with U.S. generally accepted accounting principles (“GAAP”), we report certain financial results that differ from what is reported under GAAP. We have presented certain financial measures 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 allowing a more direct comparison of 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. We estimate the tax effect of all non-GAAP adjustments by applying a marginal tax rate to each item. The income tax items represent the discrete amount that affected the period.

 

The non-GAAP financial information is provided in addition, and not as an alternative, to our reported results prepared in accordance with GAAP. Presented below is a reconciliation of GAAP and non-GAAP.  

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions, except per share amounts)		2024				2023
Pre-tax income:
Income before income taxes		$	13			$	57
Pre-tax amounts excluded from GAAP:		​
Impairment and other			14				39
Other expense / income, net			2				1
Adjusted income before income taxes (non-GAAP)		$	29			$	97
​		​				​
After-tax income:
Net income		$	8			$	36
After-tax adjustments excluded from GAAP:		​
Impairment and other, net of income tax benefit of $3 and $6 million, respectively			11				33
Other expense / income, net of income tax expense of $- and $- million, respectively			2				1
Tax reserves benefit			—				(4	)
Adjusted net income (non-GAAP)		$	21			$	66
​		​				​
Earnings per share:		​
Diluted earnings per share		$	0.09			$	0.38
Diluted EPS amounts excluded from GAAP:		​				​
Impairment and other			0.11				0.36
Other expense / income, net			0.02				—
Tax reserves benefit			—				(0.04	)
Adjusted diluted earnings per share (non-GAAP)		$	0.22			$	0.70

 

During the thirteen weeks ended May 4, 2024 and April 29, 2023 we recorded pre-tax charges of $14 million and $39 million, respectively, classified as impairment and other. See the Impairment and Other section for further information.

 

The adjustments made to other income / expense, net reflected losses associated with our minority investments and pension and postretirement costs, excluding the service cost component. See the Other (Expense) Income, net section for further information.

 

 ​

Segment Reporting and Results of Operations

 

We have determined that we have three operating segments, North America, EMEA, and Asia Pacific. Our North America operating segment includes the results of the following banners operating in the U.S. and Canada: Foot Locker, Champs Sports, Kids Foot Locker, and WSS, including each of their related e-commerce businesses. Our EMEA operating segment includes the results of the following banners operating in Europe: Foot Locker and Kids Foot Locker, including each of their related e-commerce businesses. Our Asia Pacific operating segment includes the results of the Foot Locker banner and its related e-commerce business operating in Australia, New Zealand, and Asia, as well as atmos, which operates in Japan. We have further aggregated these operating segments into one reportable segment based upon their shared customer base and similar economic characteristics. 

 

Sales

 

All references to comparable-store sales for a given period relate to sales of stores that were open at the period-end and had been open for more than one year. The computation of consolidated comparable sales also includes our direct-to-customers channel. Stores opened or closed during the period are not included in the comparable-store base; however, stores closed temporarily for relocation or remodeling are included. Computations exclude the effect of foreign currency fluctuations. In fiscal years following those with 53 weeks, including 2024, we calculate comparable sales on a 52-week basis by comparing the current and prior-year weekly periods that are most closely aligned. There may be variations in the way in which some of our competitors and other retailers calculate comparable or same store sales.

 

For the thirteen weeks ended May 4, 2024, total sales decreased by $53 million, or 2.8%, to $1,874 million, as compared with the corresponding prior-year period. Excluding the effect of foreign currency fluctuations, total sales decreased by $46.0 million, or 2.4%, for the thirteen weeks ended May 4, 2024. The information shown below represents certain sales metrics by sales channel.

 

​		Thirteen weeks ended
​		May 4,				April 29,
($ in millions)		2024				2023
Store sales		$	1,554			$	1,613
$ Change			(59	)		​
% Change			(3.7	)%		​
% of total sales			82.9				83.7
% Comparable sales decrease			(3.0	)			(7.4	)
Direct-to-customers sales			320				314
$ Change			6			​
% Change			1.9	%		​
% of total sales			17.1				16.3
% Comparable sales increase / (decrease)			4.0				(16.8