floc20230429

floc20230429_10q.htm

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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: April 29, 2023

☐

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

(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 34^th Street, New York, New York 10001

(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 May 26, 2023: 93,923,900

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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 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	23
	Item 4.	Controls and Procedures	23

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	24
	Item 3.	Defaults Upon Senior Securities	24
	Item 4.	Mine Safety Disclosures	24
	Item 5.	Other Information	24
	Item 6.	Exhibits	25

SIGNATURE			26

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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 and return merchandise; our ability to fund our planned capital investments; a recession, volatility in the financial markets, and other global economic factors; our ability to access the credit markets at competitive terms; difficulties in appropriately allocating capital and resources 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; borrowing capacity under our credit facility; repatriation of cash to the United States; supply chain issues; labor shortages and wage pressures; expectations regarding increased wages; inflation; consumer spending levels; the effect of governmental assistance programs; 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 against us or judicial decisions that affect us or our industry generally; the effects of weather; climate change; ESG risks; increased competition; geopolitical events; the financial effect of accounting regulations and critical accounting policies; credit risk relating to the risk of loss as a result of non-performance by our counterparties; 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.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	*April 29,*			*April 30,*			*January 28,*
($ in millions, except share amounts)	*2023*			*2022*			2023*
ASSETS

Current assets:
Cash and cash equivalents	$	313		$	551		$	536
Merchandise inventories		1,758			1,401			1,643
Other current assets		326			281			342
		2,397			2,233			2,521
Property and equipment, net		901			899			920
Operating lease right-of-use assets		2,331			2,566			2,443
Deferred taxes		94			79			90
Goodwill		781			783			785
Other intangible assets, net		421			441			426
Minority investments		629			759			630
Other assets		89			118			92
	$	7,643		$	7,878		$	7,907

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	474		$	565		$	492
Accrued and other liabilities		447			428			568
Current portion of debt and obligations under finance leases		6			6			6
Current portion of lease obligations		533			557			544
		1,460			1,556			1,610
Long-term debt and obligations under finance leases		445			450			446
Long-term lease obligations		2,132			2,323			2,230
Other liabilities		323			334			328
Total liabilities		4,360			4,663			4,614
Commitments and contingencies
Shareholders’ equity:
Common stock and paid-in capital: 94,175,714; 99,233,112; and 93,396,901 shares issued, respectively		766			779			760
Retained earnings		2,923			2,995			2,925
Accumulated other comprehensive loss		(396	)		(384	)		(392	)
Less: Treasury stock at cost: 260,870; 4,731,931; and 1,489 shares, respectively		(10	)		(178	)		—
Noncontrolling interest		—			3			—
Total shareholders' equity		3,283			3,215			3,293
	$	7,643		$	7,878		$	7,907

The balance sheet at January 28, 2023 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 January 28, 2023.

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

First Quarter 2023 Form 10-Q Page 1

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	*Thirteen weeks ended*
	*April 29,*			*April 30,*
($ in millions, except per share amounts)	*2023*			*2022*
Sales	$	1,927		$	2,175
Licensing revenue		4			3
Total revenue		1,931			2,178

Cost of sales		1,349			1,435
Selling, general and administrative expenses		431			463
Depreciation and amortization		51			54
Impairment and other		39			6
Income from operations		61			220

Interest expense, net		(1	)		(5	)
Other income / (expense), net		(3	)		(25	)
Income before income taxes		57			190
Income tax expense		21			58
Net income		36			132
Net loss attributable to noncontrolling interests		—			1
Net income attributable to Foot Locker, Inc.	$	36		$	133

Basic earnings per share	$	0.39		$	1.38
Weighted-average shares outstanding		93.7			96.1

Diluted earnings per share	$	0.38		$	1.37
Weighted-average shares outstanding, assuming dilution		95.1			97.2

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

First Quarter 2023 Form 10-Q Page 2

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	*Thirteen weeks ended*
	*April 29,*			*April 30,*
($ in millions)	*2023*			*2022*
Net income attributable to Foot Locker, Inc.	$	36		$	133
Other comprehensive income (loss), net of income tax

Foreign currency translation adjustment:
Translation adjustment arising during the period, net of income tax (benefit)/expense of $- and $(1), respectively		(7	)		(44	)

Hedges contracts:
Change in fair value of derivatives, net of income tax benefit of $-, and $-, respectively		1			1

Pension and postretirement adjustments:
Amortization of net actuarial gain/loss and prior service cost included in net periodic benefit costs, net of income tax expense of $1 and $1, respectively		2			2
Comprehensive income	$	32		$	92

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

First Quarter 2023 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

Noncontrolling

Shareholders'

(shares in thousands, $ in millions)

Shares

Amount

Shares

Amount

Earnings

Loss

interests

Equity

Balance at January 28, 2023

93,397

760

)

—

2,925

(392

)

—

3,293

Restricted stock issued

628

—

Issued under director and stock plans

151

SEC Form 10-Q filed by Foot Locker Inc.