Retailer’s sales grew 5.3% to $2.11 billion compared to $2 billion in the year-ago same period
Specialty athletic retailer Foot Locker Inc. (NYSE: FL) announced its Q4 FY16 and FY16 financial results on February 24th, 2017.
The New York-based Company operates as an athletic shoes and apparel retailer in two segments: Athletic Stores and Direct-to-Customers. The Athletic Stores segment retails athletic footwear, apparel, accessories, and equipment under the Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Footaction, and SIX:02, as well as Runners Point, and Sidestep brands.
As of January 28th, 2017, it operated 3,363 mall-based stores in 23 countries including the US, Canada, Europe, Australia, and New Zealand. The Direct-to-Customers segment sell athletic footwear, apparel, team licensed products, and private-label merchandise through websites including eastbay.com, final-score.com, eastbayteamsales.com, sp24.com, footlocker.com, and ladyfootlocker.com. The Company also operates 59 franchised stores. Read more about Foot Locker’s financial results below.
Q4 FY16 financial highlights
During Q4 FY16, Foot Locker’s total sales grew 5.3% to $2.11 billion compared to sales of $2.00 billion for the corresponding prior year’s same period. Excluding the effect of foreign currency fluctuations, total sales for the quarter increased 6.1%. Comparable-store sales rose 5% due to gains from basketball, running, classic footwear and apparel.
The Company’s gross margin rate improved to 33.7% of sales from 33.6% a year ago, and the selling, general, and administrative expense rate improved 60 basis points to 18.7% of sales.
The better-than-expected Q4 FY16 results reflect the successful tapping of strategic opportunities in children’s apparel, shop-in-shop expansion in collaboration with its vendors, store banner.com business, store refurbishment and enhancement of assortments. Foot Locker is expecting the strong results to continue over the next few quarters. International expansion, especially in Europe, was another growth driver. The company is also enhancing its e-commerce platform to better align its business with the changing customer preferences and ward off competition from big-box online retailers like Amazon.com Inc. (NASDAQ: AMZN).
In all, Foot Locker’s Q4 FY16 net income increased to $189 million, or $1.42 per share, compared to net income of $158 million, or $1.14 per share, in the year-ago same period.
FY16 financial highlights
During FY16, Foot Locker’s net sales grew 4.8% to $7.76 billion compared to sales of $7.41 billion in FY15. Full-year comparable store sales rose 4.3%. Excluding the effect of foreign currency fluctuations, total year-to-date sales increased 5.2%. The Company’s net income increased to $664 million in FY16, or $4.91 per share, compared to net income of $541 million, or $3.84 per share, in FY15. On a non-GAAP basis, EPS totaled $4.82 in 2016, a 12% increase over last year. This marks Foot Locker’s seventh consecutive year of meaningful sales and profit growth.
During the reporting year, Foot Locker’s earnings before interest and taxes (EBITA) surpassed $1 billion for the first time in its history and the EBIT rate improved to 13% of sales. Adjusted net income margin increased to 8.4% and sales per gross square foot reached $515.
Store update: During Q4 FY16, Foot Locker opened 20 new stores, remodeled, or relocated 59 stores, and closed 51 stores. As of January 28th, 2017, the Company operated 3,363 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, it operated 59 franchised Foot Locker stores in the Middle East and South Korea, as well as 15 franchised Runners Point stores in Germany.
Cash flow: Foot Locker ended Q4 FY16 with cash of $1.04 billion, while the debt on its balance sheet was $127 million.
Capital expenditure: For the full year FY16, the Company invested $284 million in its store fleet, its digital platform, and infrastructure.
Inventory: As of January 28th, 2017, the Company’s merchandise inventories were $1.30 billion, 1.7% higher than at the end of the comparative period last year. On a constant currency basis, inventory increased 2%.
Share repurchases and dividend: During Q4 FY16, Foot Locker spent $80 million to repurchase 1.1 million shares and paid a quarterly dividend of $0.275 per share. For FY16, the Company also returned $579 million to shareholders between its stock repurchase program and dividends, spending $432 million to repurchase 7.0 million shares, and paying $147 million in dividends.
The Board of Directors declared a quarterly cash dividend on the Company’s common stock of $0.31 per share, which will be payable on April 28th, 2017 to shareholders of record on April 13th, 2017. This dividend declaration represents a 13% increase over the Company’s previous quarterly per-share amount and is equivalent to an annualized rate of $1.24 per share. The Board also approved a new 3-year, $1.2 billion common share repurchase program extending through January 2020, replacing the Company’s previous $1 billion program. Through the end of FY16, the Company had spent $795 million under that program since it was announced two years ago.
Guidance for FY17
Being faced with a softer sales environment than last year, Foot Locker projects a mid-single digit comparable sales gain and a double-digit EPS increase for the full year FY17.
The Board of Directors approved a $277 million capital expenditure program for FY17, close to the $284 million of capital that the Company invested in FY16. The Company will spend capital to build on its key strategic initiatives, including opening new retail stores in key cities; extending its remodel programs to more of its existing store fleet; expanding geographically, particularly in Europe and with its Kids Foot Locker banner globally; building stronger capabilities in its direct-to-customer segment; and upgrading its technology and supply chain infrastructure.
Foot Locker’s stock ended the day at $76.57, slipping 0.04%, at the close on Friday, March 03rd, 2017, having vacillated between an intraday high of $77.00 and a low of $76.06 during the session. The stock’s trading volume was at 1,169,355 for the day. The Company’s market cap was at $10.21 billion as of Friday’s close.