0000850209 Foot Locker, Inc. false --02-01 Q2 2024 95,023,049 94,253,029 94,283,984 182,825 98,990 60,308 0 0 0 0 1 1 0 1 0 0 1 1 0.40 0.80 1 5 5 1 5 21.60 30.98 36.49 46.64 53.61 58.94 62.02 72.83 3 1 3 2 1 0 6 false false false false 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. Includes sales from 8 and 15 Kids Foot Locker stores operating in Europe for August 3, 2024 and July 29, 2023, respectively. See Note 5, Other (Expense) Income, net for further detail. See Note 4, Impairment and Other Charges for further detail. The carrying value of debt as of both August 3, 2024 and July 29, 2023, included $5 million of issuer’s discount and costs. 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. 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Table of Contents



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark One)

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 ​

For the quarterly period ended: August 3, 2024

 

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 ​

For the transition period from __________ to __________

 

Commission File Number: 1-10299

 


 

a1.jpg

(Exact name of registrant as specified in its charter)

 


 

New York

13-3513936

(State or other jurisdiction of incorporation or organization)

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

 ​

330 West 34th Street, New York, New York10001
(Address of principal executive offices)(Zip Code) 

 

(212-720-3700)

(Registrant’s telephone number, including area code)

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

​FL

New York Stock Exchange

 ​​

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

 ​

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. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

Number of shares of Common Stock outstanding as of August 31, 2024: 94,851,932

 



 

 
a1.jpg

 

TABLE OF CONTENTS

 

Page

PART I

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets (Unaudited)

1

Condensed Consolidated Statements of Operations (Unaudited)

2

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

3

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

4

Condensed Consolidated Statements of Cash Flows (Unaudited)

5

Notes to the Unaudited Condensed Consolidated Financial Statements (Unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

  Item 3. Quantitative and Qualitative Disclosures About Market Risk 24

Item 4.

Controls and Procedures

24

PART II

OTHER INFORMATION

24

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

  Item 3. Defaults Upon Senior Securities 25
  Item 4. Mine Safety Disclosures 25
  Item 5. Other Information 25

Item 6.

Exhibits

26

SIGNATURE

27

 ​

 

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

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CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

August 3,

  

July 29,

  

February 3,

 

($ in millions, except share amounts)

 

2024

  

2023

  

2024*

 

ASSETS

            

 

  

  

 

Current assets:

            

Cash and cash equivalents

 $291  $180  $297 

Merchandise inventories

  1,648   1,831   1,509 

Other current assets

  404   360   419 

  2,343   2,371   2,225 

Property and equipment, net

  905   898   930 

Operating lease right-of-use assets

  2,173   2,266   2,188 

Deferred taxes

  130   94   114 

Goodwill

  764   774   768 

Other intangible assets, net

  393   415   399 

Minority investments

  150   629   152 

Other assets

  95   89   92 

 $6,953  $7,536  $6,868 

 

  

  

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

            

 

  

  

 

Current liabilities:

 

         

Accounts payable

 $487  $514  $366 

Accrued and other liabilities

  424   419   428 

Current portion of debt and obligations under finance leases

  5   6   5 

Current portion of lease obligations

  496   513   492 

  1,412   1,452   1,291 

Long-term debt and obligations under finance leases

  440   444   442 

Long-term lease obligations

  1,978   2,071   2,004 

Other liabilities

  226   322   241 

Total liabilities

  4,056   4,289   3,978 

Commitments and contingencies

 

   

   

  

Shareholders’ equity:

     

  

 

Common stock and paid-in capital: 95,023,049; 94,253,029; and 94,283,984 shares issued, respectively

  794   767   776 

Retained earnings

  2,478   2,881   2,482 

Accumulated other comprehensive loss

  (370)  (397)  (366)

Less: Treasury stock at cost: 182,825; 98,990; and 60,308 shares, respectively

  (5)  (4)  (2)

Total shareholders' equity

  2,897   3,247   2,890 

 $6,953  $7,536  $6,868 

 

*

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. ​

 

 

Second Quarter 2024 Form 10-Q Page 1

 

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Thirteen weeks ended

  

Twenty-six weeks ended

 

 

August 3,

  

July 29,

  

August 3,

  

July 29,

 

($ in millions, except per share amounts)

 

2024

  

2023

  

2024

  

2023

 

Sales

 $1,896  $1,861  $3,770  $3,788 

Licensing revenue

  4   3   9   7 

Total revenue

  1,900   1,864   3,779   3,795 

 

  

  

  

 

Cost of sales

  1,373   1,357   2,708   2,706 

Selling, general and administrative expenses

  476   442   937   873 

Depreciation and amortization

  51   50   102   101 

Impairment and other

  9   14   23   53 

(Loss) income from operations

  (9)  1   9   62 

 

  

  

  

 

Interest expense, net

  (3)  (4)  (4)  (5)

Other (expense) income, net

  (2)     (6)  (3)

(Loss) income before income taxes

  (14)  (3)  (1)  54 

Income tax (benefit) expense

  (2)  2   3   23 

Net (loss) income

 $(12) $(5) $(4) $31 

 

  

  

  

 

Basic (loss) earnings per share

 $(0.13) $(0.05) $(0.04) $0.33 

Weighted-average shares outstanding

  95.0   94.2   94.8   94.0 

 

  

  

  

 

Diluted (loss) earnings per share

 $(0.13) $(0.05) $(0.04) $0.33 

Weighted-average shares outstanding, assuming dilution

  95.0   94.2   94.8   95.0 

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

Second Quarter 2024 Form 10-Q Page 2

 

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

 

 

Thirteen weeks ended

  

Twenty-six weeks ended

 

 

August 3,

  

July 29,

  

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

  

2024

  

2023

 

Net (loss) income

 $(12) $(5) $(4) $31 

Other comprehensive income (loss), net of income tax

                

 

  

  

  

 

Foreign currency translation adjustment:

                

Translation adjustment arising during the period, net of income tax benefit of $-, $-, $-, and $-, respectively

  9      (10)  (7)

     

      

 

Hedges contracts:

                

Change in fair value of derivatives, net of income tax expense (benefit) of $1, $(1), $-, and $(1), respectively

  4   (3)  3   (2)

     

         

Pension and postretirement adjustments:

     

         

Amortization of net actuarial loss and prior service cost included in net periodic benefit costs, net of income tax expense of $-, $-, $1, and $1, respectively

  2   2   3   4 

Comprehensive income (loss)

 $3  $(6) $(8) $26 

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

Second Quarter 2024 Form 10-Q Page 3

 

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(Unaudited)

 

 

Additional Paid-In

  

  

  

  

Accumulated

  

 

 

Capital &

  

  

  

  

Other

  

Total

 

Thirteen weeks ended

 

Common Stock

  

Treasury Stock

  

Retained

  

Comprehensive

  

Shareholders'

 

(shares in thousands, $ in millions)

 

Shares

  

Amount

  

Shares

  

Amount

  

Earnings

  

Loss

  

Equity

 

Balance at May 4, 2024

  94,940  $787   (231) $(6) $2,490  $(385)  2,886 

Restricted stock issued

  52                       

Issued under director and stock plans

  31   1                   1 

Share-based compensation expense

      7                   7 

Shares of common stock used to satisfy tax withholding obligations

          (14)  (1)          (1)

Reissued for Employee Stock Purchase Plan

      (1)  62   2           1 

Net loss

                  (12)      (12)

Translation adjustment, net of tax

                      9   9 

Change in hedges, net of tax

                      4   4 

Pension and postretirement adjustments, net of tax

                      2   2 

Balance at August 3, 2024

  95,023  $794   (183) $(5) $2,478  $(370) $2,897 

 

  

  

  

  

  

  

 

Balance at April 29, 2023

  94,176  $766   (261) $(10) $2,923  $(396) $3,283 

Restricted stock issued

  25                    

Issued under director and stock plans

  52   2                   2 

Share-based compensation expense

 

   2                   2 

Shares of common stock used to satisfy tax withholding obligations

 

       (5)              

Reissued for Employee Stock Purchase Plan

      (3)  167   6           3 

Net loss

 

               (5)      (5)

Cash dividends on common stock ($0.40 per share)

 

               (37)      (37)

Translation adjustment, net of tax

 

                       

Change in hedges, net of tax

 

                   (3)  (3)

Pension and postretirement adjustments, net of tax

 

                   2   2 

Balance at July 29, 2023

  94,253  $767   (99) $(4) $2,881  $(397) $3,247 

 

 

 

Additional Paid-In

  

  

  

  

Accumulated

  

 

 

Capital &

  

  

  

  

Other

  

Total

 

Twenty-six weeks ended

 

Common Stock

  

Treasury Stock

  

Retained

  

Comprehensive

  

Shareholders'

 

(shares in thousands, $ in millions)

 

Shares

  

Amount

  

Shares

  

Amount

  

Earnings

  

Loss

  

Equity

 

Balance at February 3, 2024

  94,284  $776   (60) $(2) $2,482  $(366) $2,890 

Restricted stock issued

  469                       

Issued under director and stock plans

  270   6                   6 

Share-based compensation expense

      13                   13 

Shares of common stock used to satisfy tax withholding obligations

          (185)  (5)          (5)

Reissued for Employee Stock Purchase Plan

      (1)  62   2           1 

Net loss

                  (4)      (4)

Translation adjustment, net of tax

                      (10)  (10)

Change in hedges, net of tax

                      3   3 

Pension and postretirement adjustments, net of tax

                      3   3 

Balance at August 3, 2024

  95,023  $794   (183) $(5) $2,478  $(370) $2,897 

 

  

  

  

  

  

  

 

Balance at January 28, 2023

  93,397  $760   (1) $  $2,925  $(392) $3,293 

Restricted stock issued

  653                       

Issued under director and stock plans

  203   6                   6 

Share-based compensation expense

      4                   4 

Shares of common stock used to satisfy tax withholding obligations

          (265)  (10)          (10)

Reissued for Employee Stock Purchase Plan

      (3)  167   6           3 

Net income

                  31       31 

Cash dividends on common stock ($0.80 per share)

                  (75)      (75)

Translation adjustment, net of tax

                      (7)  (7)

Change in hedges, net of tax

                      (2)  (2)

Pension and postretirement adjustments, net of tax

                      4   4 

Balance at July 29, 2023

  94,253  $767   (99) $(4) $2,881  $(397) $3,247 

 

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

Second Quarter 2024 Form 10-Q Page 4

 

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Twenty-six weeks ended

 

 

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

 

From operating activities:

        

Net (loss) income

 $(4) $31 

Adjustments to reconcile net (loss) income to net cash from operating activities:

 

  

 

Non-cash impairment and other

  16   21 

Depreciation and amortization

  102   101 

Deferred income taxes

  (29)  (3)

Share-based compensation expense

  13   4 

Gain on sales of businesses

     (2)

Change in assets and liabilities:

     

 

Merchandise inventories

  (143)  (194)

Accounts payable

  123   23 

Accrued and other liabilities

  31   (97)

Other, net

  17   (68)

Net cash provided by (used in) operating activities

  126   (184)

From investing activities:

        

Capital expenditures

  (132)  (105)

Minority investments

  (1)  (1)

Proceeds from sales of businesses

     10 

Net cash used in investing activities

  (133)  (96)

From financing activities:

        

Payment of debt issuance costs

  (4)   

Dividends paid on common stock

     (75)

Shares of common stock repurchased to satisfy tax withholding obligations

  (5)  (10)

Payment of obligations under finance leases

  (3)  (3)

Proceeds from exercise of stock options

  5   5 

Treasury stock reissued under employee stock plan

  2   3 

Net cash used in financing activities

  (5)  (80)

Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash

     3 

Net change in cash, cash equivalents, and restricted cash

  (12)  (357)

Cash, cash equivalents, and restricted cash at beginning of year

  334   582 

Cash, cash equivalents, and restricted cash at end of period

 $322  $225 

 

  

 

Supplemental information:

        

Interest paid

 $12  $9 

Income taxes paid

  35   75 

Cash paid for amounts included in measurement of operating lease liabilities

  339   344 

Cash paid for amounts included in measurement of finance lease liabilities

  4   4 

Right-of-use assets obtained in exchange for operating lease obligations

  263   89 

Assets obtained in exchange for finance lease obligations

  1    

 

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 ​

Second Quarter 2024 Form 10-Q Page 5

 

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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.

 

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

 

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

 

Recent Accounting Pronouncements

 

Other than the pronouncements disclosed in our 2023 Annual Report on 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

  

Twenty-six weeks ended

 

 

August 3,

  

July 29,

  

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

  

2024

  

2023

 

Sales by Channel

                

Stores

 $1,594  $1,572  $3,148  $3,185 

Direct-to-customers

  302   289   622   603 

Total sales

  1,896   1,861   3,770   3,788 

Licensing revenue

  4   3   9   7 

Total revenue

 $1,900  $1,864  $3,779  $3,795 

 

Second 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

  

Twenty-six weeks ended

 

 

August 3,

  

July 29,

  

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

  

2024

  

2023

 

Revenue by Geography

                

United States

 $1,225  $1,177  $2,497  $2,464 

International

  675   687   1,282   1,331 

Total revenue

 $1,900  $1,864  $3,779  $3,795 

 

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

 

 

Thirteen weeks ended

  

Twenty-six weeks ended

 

 

August 3,

  

July 29,

  

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

  

2024

  

2023

 

Foot Locker

 $754  $704  $1,513  $1,448 

Champs Sports

  268   293   535   621 

Kids Foot Locker

  154   146   337   313 

WSS

  155   145   315   295 

Other

  1      1    

North America

  1,332   1,288   2,701   2,677 

Foot Locker (1)

  445   416   839   795 

Sidestep

     12      26 

EMEA

  445   428   839   821 

Foot Locker

  87   102   159   200 

atmos

  32   43   71   90 

Asia Pacific

  119   145   230   290 

Total sales

 $1,896  $1,861  $3,770  $3,788 

 

(1)Includes sales from 8 and 14 Kids Foot Locker stores operating in Europe for  August 3, 2024 and July 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.

 

 

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

 

Gift card liability at beginning of year

 $29  $36 

Redemptions

  (80)  (138)

Breakage recognized in sales

  (2)  (9)

Activations

  76   133 

Gift card liability

 $23  $22 

 

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

 

Second 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

  

Twenty-six weeks ended

 

 

August 3,

  

July 29,

  

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

  

2024

  

2023

 

Division profit

 $17  $21  $60  $125 

Less: Impairment and other (1)

  9   14   23   53 

Less: Corporate expense (2)

  17   6   28   10 

(Loss) income from operations

  (9)  1   9   62 

Interest expense, net

  (3)  (4)  (4)  (5)

Other (expense) income, net (3)

  (2)     (6)  (3)

(Loss) income before income taxes

 $(14) $(3) $(1) $54 

 

(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 for further detail.

 

4. Impairment and Other

 

 

Thirteen weeks ended

  

Twenty-six weeks ended

 

 

August 3,

  

July 29,

  

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

  

2024

  

2023

 

Impairment of long-lived assets and right-of-use assets

 $9  $3  $16  $21 

Legal claims

        7    

Transformation consulting

     7      26 

Reorganization costs

     3      5 

Other

     1      1 

Total impairment and other

 $9  $14  $23  $53 

 

For the thirteen weeks ended  August 3, 2024, we recorded $9 million of impairment of long-lived assets and right-of-use assets primarily related to our decision to exit underperforming operations in South Korea, Denmark, Norway, and Sweden. We will close all stores operating in those regions as we focus on improving the overall results of our international operations. For the twenty-six weeks ended August 3, 2024, we recorded an additional $7 million of impairment of long-lived assets and right-of-use assets related to our decision to no longer operate, and to sublease, an unprofitable store in Europe, and a $7 million loss accrual for legal claims.

 

5. Other (Expense) Income, net

 

 

Thirteen weeks ended

  

Twenty-six weeks ended

 
  

August 3,

  

July 29,

  

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

  

2024

  

2023

 

Pension and postretirement net benefit expense, excluding service cost

 $(1) $(2) $(3) $(4)

Share of losses related to minority investments

        (2)  (1)

Foot Locker Singapore and Malaysia divestiture

     2      2 

Other

  (1)     (1)   

Total other (expense) income, net

 $(2) $  $(6) $(3)

 

Second 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.

 

 

August 3,

  

July 29,

 

($ in millions)

 

2024

  

2023

 

Cash and cash equivalents

 $291  $180 

Restricted cash included in other current assets

  3   13 

Restricted cash included in other non-current assets

  28   32 

Cash, cash equivalents, and restricted cash

 $322  $225 

 

Amounts included in restricted cash primarily relate to amounts held in escrow in connection with various leasing arrangements in Europe. The deposits held in insurance trusts to satisfy the requirement to collateralize part of the self-insured workers’ compensation and liability claims have been replaced by standby letters of credit during the second quarter of 2024.

 

7. Revolving Credit Facility

 

In the second quarter of 2024, we entered into an amendment to the credit agreement (as so amended, the “Amended Credit Agreement”), which governs our $600 million secured asset-based revolving credit facility. The amendment provides for, among other things, (i) an uncommitted “accordion” feature that allows us, subject to certain customary conditions, to increase the size of the revolving credit facility to up to $750 million in the aggregate, (ii) an extension of the maturity date from July 14, 2025 to June 20, 2029, and (iii) a change to the interest rates and commitment fees applicable to the loans and commitments, respectively, as described below. The amendment provides that the interest rate applicable to loans drawn under the credit facility will be equal to, at our option, either a base rate, determined by reference to the federal funds rate, plus a margin of 0.50% to 1.00% per annum, or a forward-looking term rate, determined by reference to Secured Overnight Financing Rate plus a margin of 1.50% to 2.00% per annum, in each case, depending on availability under the Amended Credit Agreement. In addition, we will pay a commitment fee from 0.25% to 0.375% per annum on the unused portion of the commitments under the Amended Credit Agreement. No events of default occurred during 2024.

 

Our obligations under the Amended Credit Agreement are secured by a first priority lien on certain assets, including inventory and accounts receivable, cash deposits, and certain insurance proceeds. We may use the Amended Credit Agreement to, among other things, support standby letters of credit in connection with insurance programs. We did not have any borrowings outstanding as of August 3, 2024 and July 29, 2023, and the letters of credit outstanding as of  August 3, 2024 were not significant.

 

We paid fees of $4 million in connection with the amendment of our credit facility and such costs are amortized over the life of the extended facility. The unamortized balance at August 3, 2024 was $5 million, which included the unamortized costs of the prior agreement. 

 

8. Accumulated Other Comprehensive Loss

 

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

 

 

August 3,

  

July 29,

  

February 3,

 

($ in millions)

 

2024

  

2023

  

2024

 

Foreign currency translation adjustments

 $(183) $(155) $(173)

Hedge contracts

  1   (5)  (2)

Unrecognized pension cost and postretirement benefit

  (188)  (237)  (191)

 $(370) $(397) $(366)

 

Second Quarter 2024 Form 10-Q Page 9

 
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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

8. Accumulated Other Comprehensive Loss (continued)

The changes in AOCL for the twenty-six weeks ended August 3, 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

  (10)  5      (5)

Reclassification of hedges, net of tax

     (2)     (2)

Amortization of pension actuarial loss, net of tax

        3   3 

Other comprehensive (loss) income

  (10)  3   3   (4)

Balance as of August 3, 2024

 $(183) $1  $(188) $(370)

 

Reclassifications from AOCL for the twenty-six weeks ended August 3, 2024 were as follows:

 

($ in millions)

 

 

Reclassification of hedge loss:

    

Cross-currency swap

 $(