26 Aug Foot Locker’s Q2 Earnings Soar on 7 Percent Comp Gain
Foot Locker, Inc. reported net income for the company’s second quarter ended Aug. 2 jumped 43 percent to $92 million, or 63 cents per share, compared with net income of $66 million, or 44 cents, last year. Second quarter comparable store sales increased 7.0 percent.
On an adjusted basis, earnings came in at 64 cents, up from 46 cents, and easily exceeded Wall Street’s consensus estimate of 54 cents.
Total second quarter sales increased 12.9 percent, to $1,641 million this year, compared with sales of $1,454 million for the corresponding prior-year period. Excluding the effect of foreign currency fluctuations, total sales for the second quarter increased 11.7 percent.
The company’s gross margin rate increased to 32.0 percent of sales from 31.2 percent in the second quarter of 2013, while the selling, general, and administrative expense rate improved to 20.9 percent of sales from 21.6 percent last year.
“The team at Foot Locker once again achieved record levels of sales and profits in the second quarter, and I am extremely proud of their efforts,” said Ken C. Hicks, Chairman of the Board and Chief Executive Officer. “We delivered excellent financial and operational results through the outstanding execution of our strategic priorities. This continues to be a winning formula for us, and we remain committed to taking full advantage of the many opportunities we have identified — over the near, intermediate, and longer terms — to continue producing a consistent, strong performance.”
Year-To-Date Results
Net income for the company’s first six months of the year increased to $254 million, or $1.73 per share, compared to net income of $204 million, or $1.34 per share, for the corresponding period in 2013. Earnings per share for the six-month period increased 29 percent compared to the same period in 2013. Year-to-date sales were $3,509 million, an increase of 13.5 percent compared to sales of $3,092 million in the corresponding six-month period of 2013. Year-to-date comparable store sales increased 7.3 percent. Excluding the effect of foreign currency fluctuations, total sales year-to-date increased 12.6 percent.
Non-GAAP Adjustment
During the second quarter, the company recorded a $2 million charge related to the impairment of the CCS trade name, resulting from the previously announced transition of its skate business from CCS to its Eastbay brand. Excluding this item, second quarter earnings were $0.64 per share on a non-GAAP basis, an increase of 39 percent compared to the company’s non-GAAP earnings of $0.46 in the second quarter last year. For the first six months of 2014, non-GAAP net income was $1.75 per share, an increase of 28 percent over the $1.37 per share earned in the corresponding period of 2013.
Financial Position
As of August 2, 2014, the company’s merchandise inventory was $1,335 million, 2.2 percent higher than at the end of the second quarter last year, while the company’s cash, cash equivalents, and short-term investments totaled $957 million and the debt on its balance sheet was $137 million.
During the second quarter, the company repurchased approximately 1.33 million shares of its common stock for $66 million.
“So far this year, we have returned $200 million of cash to our shareholders through our dividend and share repurchase programs,” said Lauren B. Peters, Executive Vice President and Chief Financial Officer. “Our strong financial position has enabled us to consistently increase those programs in recent years while we have also made substantial investments in the business, including the $220 million of capital expenditures we are targeting for fiscal 2014.”
Store Base Update
During the second quarter, the company opened 14 new stores, remodeled/relocated 112 stores and closed 18 stores. As of August 2, 2014, the company operated 3,460 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, 47 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 27 franchised Runners Point and Sidestep stores in Germany and Switzerland.
