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Foot Locker 3Q Sales Rose 3%; But Hurricanes Will Trim EPS
NOVEMBER 03, 2005 --
Foot Locker reported 3Q sales of $1,407 million vs $1,366 million in the comparable period last year, an increase of 3.0%. For this same 13-week period, comp-store sales increased 2.7%. However, the chain warned its 3Q EPS will be lower than expected due to hurricane damage.
YTD, sales increased 7.0% to $4,088 million. Comp-store sales for the first nine months increased 2.2%. Excluding the effect of foreign currency fluctuations, total sales for the 13-week and 39-week periods increased 2.6% and 6.2%, respectively. Comp-store sales in 3Q reflected a mid-single digit increase at its combined US businesses, led by strong increases at Footaction and Champs Sports. International operations posted flat comp-store sales, including a very low-single digit decrease at its European stores.
"Our recent merchandising initiatives at our European business have contributed to an improving sales trend during the third quarter versus the first six months of this year. These initiatives included increasing our promotional posture in select European markets - a strategy designed to reduce our inventory growth rate and better compete in a more competitive environment. This initiative also led to a lower division profit margin in Europe, albeit at a rate still anticipated to be in the low-double-digit range. Additionally, our increased promotional strategy in Europe has contributed to our expected consolidated third quarter gross margin rate being lower than the same period of last year," stated Matt Serra, COB/CEO.
Another significant challenge during 3Q was dealing with the destruction from Hurricanes Katrina, Rita and Wilma. A charge of $4 million, or 2¢ per share, was recorded in 3Q05 to write down merchandise inventory and fixed assets that were destroyed as a result of these storms, net of anticipated insurance proceeds. The company continues to work with its insurance broker and carriers in regard to the terms of its insurance coverages related to these storms, and expects to collect much of its sustained losses, which may result in the charge being reduced in a future reporting period. Additional charges, net of credits, totaling $3 million, or 1¢ per share were recorded during 3Q primarily related to the potential insolvency of one of the company's third-party insurance administrators and the settlement of litigation proceedings.
Serra concluded, "We currently expect our third quarter net income per share from continuing operations to be in the range of 39¢ to 41¢. Third quarter earnings per share from continuing operations of 42¢ to 44¢ would have been expected without the 3¢ per share unanticipated charges outlined above."
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Sporting goods industry
Profits
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Comparable-store sales
Companies
3Q Inc.
Foot Locker Inc.
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comp-store sales
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share from continuing operations
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