NEW YORK — Earnings and sales were down for both the fourth quarter and year, Foot Locker reported last Wednesday — and while the economic forecast is gloomy, the company said it was making plans to weather the storm.
For the three months ended Jan. 31, the New York-based retailer registered a loss of $126 million, or 82 cents a diluted share, against net income of $72 million, or 46 cents, in the year-ago quarter. Excluding charges for impairment, store closings and other factors as well as discontinued operations, EPS for the quarter was 24 cents. For the year, the loss was $81 million, or 53 cents a diluted share, against income of $38 million, or 24 cents, in 2007.
Foot Locker also said that when preparing 2008 results it had become aware of errors in calculation for its income tax expense for the final quarter and full year of 2007. Income and earnings per share for both periods for 2007 have decreased by $9 million, or 6 cents a share. The adjustments were reflected in the company’s statement on earnings late Wednesday and also will be reflected in its full-year 2008 report in its regulatory filing with the Securities and Exchange Commission.
Matt Serra, chairman and CEO of Foot Locker, said on a post-earnings conference call that the company would pursue cost-cutting measures — including renegotiating leases and streamlining employee hours to match store traffic — in the coming year. “Clearly, we are still operating in a global retail recession,” he said. “We are determined, however, to maintain our financial strength, so that when the strength of the economic climate improves, we will emerge in a strong competitive position.”
Serra added that the company has high hopes in 2009 for its skate business, including the recently acquired catalog and online retailer CCS. “CCS has an opportunity to generate double-digit operating profit margins during 2009, in line with those of Footlocker.com,” Serra said, adding that Foot Locker would move to expand skate in the brick-and-mortar business.
Sam Poser, an analyst at Sterne Agee & Leach, said Foot Locker had made the right changes for this difficult time.
“Inventory is in great shape,” he said, “at the lowest levels since 2003. If they keep the pressure on the inventory, the cost-cutting and staffing the stores specifically to traffic trends, that’s going to help them a lot.
“[Foot Locker] has come the farthest of anybody,” Poser added. “They’re making the best of a bad situation, and that’s all you can expect in this environment.”