Foot Locker (FL)

Athletic Stores

     The Company operates 3,641 stores in the Athletic Stores segment. The following is a brief description of the Athletic Stores segment’s operating businesses:

Athletic
Stores

     The
Company operates 3,641 stores in the Athletic Stores segment. The following is a
brief description of the Athletic Stores segment’s operating
businesses:

Athletic
Stores

     The
Company operates 3,641 stores in the Athletic Stores segment. The following is a
brief description of the Athletic Stores segment’s operating
businesses:

Athletic Stores

Athletic
Stores

Athletic
Stores

Athletic Stores

     Athletic Stores sales decreased by 3.8 percent and 1.2 percent for the thirteen and thirty-nine weeks ended November 1, 2008, respectively, as compared with the corresponding prior-year periods. Excluding the effect of foreign currency fluctuations, primarily related to the euro, sales from athletic store formats decreased 3.4 percent and 3.3 percent for the thirteen and thirty-nine weeks ended November 1, 2008, respectively, as compared with the corresponding prior-year periods. The decline in sales for the thirteen and thirty-nine weeks ended November 1, 2008 was related to the domestic operations, primarily as a result of operating 182 fewer stores. Additionally, domestic footwear sales increased slightly while apparel sales declined significantly for both the thirteen and thirty-nine week periods ended November 1, 2008 as compared with the corresponding prior-year periods. Excluding the effect of foreign currency fluctuations, sales in Europe were essentially flat for the thirteen weeks ended November 1, 2008 and decreased low single digits for the thirty-nine weeks ended November 1, 2008, as compared with the corresponding prior-year periods. While Foot Locker Europe’s footwear sales were lower than the corresponding prior-year period, sales of marquee footwear continued to increase, in particular running footwear. The declines in Foot Locker Europe’s footwear sales were offset by improved apparel sales. Athletic stores comparable-store sales decreased by 2.0 percent and 2.1 percent, for the thirteen and thirty-nine weeks ended November 1, 2008, respectively.

     Athletic Stores division profit for the thirteen weeks ended November 1, 2008 increased to $42 million, or 3.5 percent, as a percentage of sales, from a division loss of $53 million for the thirteen weeks ended November 3, 2007. Athletic Stores division profit for the thirty-nine weeks ended November 1, 2008 increased to $121 million, or 3.3 percent, as a percentage of sales, from a division loss of $32 million for the thirty-nine weeks ended November 3, 2007. Included in division profit for the thirty-nine weeks ended November 1, 2008 are $5 million in costs associated with the closure of underproductive stores, primarily lease termination costs. Included in the thirteen and thirty-nine weeks ended November 3, 2007 are impairment charges totaling $102 million and store closing costs of $3 million. Excluding these charges and costs, division profit declined by $10 million and increased by $53 million for the thirteen and thirty-nine weeks ended November 1, 2008, respectively, as compared with the corresponding prior-year periods. The decline for the third quarter related to the domestic operations, which had lower sales and gross margin rate. The increase in division profit for the thirty-nine weeks ended November 1, 2008 related to increased domestic division profit as a result of lower promotional markdowns and reduced depreciation and amortization expense, offset, in part, by a decrease in Foot Locker Europe’s results. While Foot Locker Europe remains profitable, with division operating profit margins for both the third quarter and year-to-date periods of 2008 in the high single digits, results for the thirty-nine weeks ended November 1, 2008 were considerably lower than the corresponding prior-year period. Additionally, management will monitor the results of the domestic operations, in particular Lady Foot Locker and Champs Sports, due to the difficult retail environment. Management will assess the impact of various initiatives on the projected performance of these divisions and, if necessary, may perform an analysis of recoverability of store long-lived assets pursuant to SFAS No. 144.

Athletic Stores

     Athletic Stores sales increased by 1.2 percent and 0.2 percent for the thirteen and twenty-six weeks ended August 2, 2008, respectively, as compared with the corresponding prior-year periods. Excluding the effect of foreign currency fluctuations, primarily related to the euro, sales from athletic stores decreased 2.4 percent and 3.2 percent for the thirteen and twenty-six weeks ended August 2, 2008, respectively, as compared with the corresponding prior-year periods. Comparable-store sales decreased by 1.1 percent and 2.2 percent for the thirteen and twenty-six weeks ended August 2, 2008, respectively. The decrease in sales, excluding the effect of foreign currency fluctuations, for the thirteen and twenty-six weeks ended August 2, 2008 was primarily related to fewer stores in the domestic operations and a comparable-store decline in Foot Locker Europe. Other international divisions reported increased sales for both the quarter and year-to-date periods of 2008. Domestically, footwear sales for the thirteen and twenty-six weeks ended August 2, 2008 increased, particularly in the basketball and running categories, while apparel sales declined significantly as compared with the corresponding prior-year periods. The decline in Foot Locker Europe’s sales primarily related to the decline in footwear sales; however the higher-priced technical footwear, particularly running, improved while apparel sales were essentially flat.

     Athletic Stores division profit for the thirteen weeks ended August 2, 2008 increased to $39 million, or 3.2 percent, as a percentage of sales, from a division loss of $13 million for the thirteen weeks ended August 4, 2007. Athletic Stores division profit for the twenty-six weeks ended August 2, 2008 increased to $79 million, or 3.2 percent, as percentage of sales, from a division profit of $21 million for the twenty-six weeks ended August 4, 2007. Included in division profit for the thirteen-weeks and twenty-six weeks ended August 2, 2008 are $1 million and $5 million, respectively, in costs associated with the closure of underproductive stores, primarily lease termination costs. The increase in division profit is mainly attributable to increases in the U.S. divisions, offset, in part, by a decrease in Foot Locker Europe’s division profit. The increase in the U.S. divisions’ profit was related to lower promotional markdowns and reduced depreciation and amortization expense. While Foot Locker Europe remains profitable, with division operating profit margins for both the second quarter and year-to-date periods of 2008 in the high single digits, results for the twenty-six weeks ended August 2, 2008 were considerably lower than the corresponding prior-year period. Management will continue to monitor the progress of restoring division results to historical levels of profitability and will assess, if necessary, the impact of various initiatives on the projected performance, which may include an analysis of recoverability of store long-lived assets pursuant to SFAS No. 144.

Athletic Stores

     Athletic Stores sales decreased by 0.7 percent to $1,217 million for the thirteen weeks ended May 3, 2008, as compared with the corresponding prior year period of $1,226 million. Excluding the effect of foreign currency fluctuations, primarily related to the euro, sales from athletic store formats decreased 4.1 percent for the thirteen weeks ended May 3, 2008, as compared with the corresponding prior year period. Comparable-store sales decreased by 3.2 percent for the thirteen weeks ended May 3, 2008. The decline in sales for the thirteen weeks ended May 3, 2008 was related to the Company’s domestic and European operations. Sales in the U.S. increased slightly in footwear but declined significantly in apparel. Sales in Europe declined in both footwear and apparel. The trend away from low-profile styles in Europe continued during the first quarter of 2008 while sales of higher-priced technical footwear improved modestly.

     Athletic Stores division profit increased 17.6 percent for the thirteen weeks ended May 3, 2008, as compared with the corresponding prior period. Athletic Stores division profit, as a percentage of sales, increased to 3.3 percent for the thirteen weeks ended May 3, 2008, from 2.8 percent in the corresponding prior year period. Included in division profit for the thirteen weeks ended May 3, 2008 are $4 million in costs associated with the closure of underproductive stores, primarily lease termination costs. The increase in division profit is mainly attributable to increases in the U.S. divisions, offset, in part, by a decrease in Foot Locker Europe’s division profit. The increase in the U.S. divisions’ profit was related to reduced depreciation and amortization expense as well as the result of lower markdowns taken.

Athletic Stores

Athletic
Stores

Athletic Stores

     Athletic Stores sales decreased by 1.5 percent and 2.6 percent for the thirteen and twenty-six weeks ended August 4, 2007, respectively, as compared with the corresponding prior-year periods. Excluding the effect of foreign currency fluctuations, primarily related to the euro, sales from athletic stores decreased 3.2 percent and 4.4 percent for the thirteen and twenty-six weeks ended August 4, 2007, respectively, as compared with the corresponding prior-year periods. The decline in sales for the thirteen and twenty-six weeks ended August 4, 2007 was primarily related to the domestic operations, most significantly in Foot Locker. Comparable-store sales decreased by 7.3 percent and 6.4 percent for the thirteen and twenty-six weeks ended August 4, 2007, respectively. Due to the Company’s decision to liquidate slow-selling merchandise, average selling prices for footwear in the U.S. declined approximately 10 percent, while unit sales increased approximately 3 percent for the thirteen weeks ended August 4, 2007. Sales in the U.S. were negatively affected by a decline in consumer spending coupled with a shift toward casual footwear, including the trend toward sandals and brown shoes. Additionally, in two key markets school openings and sales tax-free periods were later in August as compared with the prior-year period. Internationally, comparable-store sales declined mid-single digits. In Europe, the sales trend of higher priced technical footwear continued to improve during the second quarter, while sales of low-profile footwear styles declined.

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Athletic Stores

     Athletic Stores sales decreased by 3.7 percent to $1,226 million for the thirteen weeks ended May 5, 2007, as compared with the corresponding prior year period of $1,273 million. Excluding the effect of foreign currency fluctuations, primarily related to the euro, sales from athletic store formats decreased 5.6 percent for the thirteen weeks ended May 5, 2007, as compared with the corresponding prior year period. Comparable-store sales decreased by 5.4 percent for the thirteen weeks ended May 5, 2007. The decline in sales for the thirteen weeks ended May 5, 2007 was primarily related to the domestic operations. Sales in the U.S. were negatively affected by a decline in consumer spending coupled with a shift toward casual footwear and soft apparel sales. Basketball footwear sales increased in the marquee category; however this was offset by lower sales in running and classic footwear styles. In Europe, the sales trend improved modestly as compared with 2006 reflecting low single digit decline in comparable-store sales. Increased sales of low profile footwear styles continued during the first quarter of 2007, while the sales trend of higher priced technical footwear improved.

     Athletic Stores division profit decreased 65.7 percent for the thirteen weeks ended May 5, 2007, as compared with the corresponding prior period. Athletic Stores division profit, as a percentage of sales, decreased to 2.8 percent for the thirteen weeks ended May 5, 2007, from 7.8 percent in the corresponding prior year period. The decrease in division profit is mainly attributable to decreases in the U.S. divisions, offset, in part, by an increase in Foot Locker Europe’s division profit. This decline in the U.S. divisions’ profit was principally the result of a decline in sales, as well as higher markdowns recorded to drive sales and to clear inventory. The Company is in the process of developing various merchandising initiatives in an effort to improve performance in the U.S. formats. These initiatives include aligning inventory levels with the current sales trend, which will include higher promotional markdowns. Many of these initiatives center around the back-to-school selling period; accordingly, management will monitor the progress of the domestic operations and will assess, if necessary, the impact of various initiatives on the projected performance of the divisions, which may include an analysis of recoverability of store long-lived assets pursuant to SFAS No. 144. Foot Locker Europe’s division profit increased as compared with the corresponding prior year period, reflecting an improved gross margin rate due to lower promotional markdowns, in particular for technical footwear styles.

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Athletic Stores

Athletic Stores

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