Foot Locker Posts Q4 Turnaround

BOSTON — On the heels of reporting a fourth-quarter profit against a loss the prior year, Foot Locker Inc. is planning for more robust times ahead.

The firm, which will fully outline its “strategic plan” for 2010 and beyond at an investor meeting on Tuesday, said it expects full-year same-store sales to increase in the low single digits, based, in part, on strong sales in February, when comps rose in the mid-single digits in its U.S., international and online businesses. Though it did not provide a specific earnings-per-share guidance, the firm predicted a double-digit percentage profit increase this year.

“We expect both our gross margin rate and our selling, general and administrative rates to improve slightly versus last year, reflecting our more favorable inventory position and continuing prudent expense management,” CFO Bob McHugh said on the firm’s post-earnings conference call last Thursday. “Looking beyond 2010, we are encouraged that we are at an inflection point for a meaningful and sustainable longer-term improvement in our financial results.”

Of note, Europe has emerged as one region in recovery mode, Ken Hicks, president and CEO, said on the call. Comparable-store sales there increased in the mid-single digits during the quarter. In January alone, comps rose “to nearly double digits, with a strong gain across each of the major countries in which we operate.” Basketball had the strongest gains in the month, though running is the region’s top-performing category.

Foot Locker said last week it had a fourth-quarter net income of $23 million, or 14 cents a share, versus a loss of $125 million, or 81 cents, the prior year. Results in the latest quarter included $16 million in inventory write-downs, restructuring charges and an income tax adjustment.

On an adjusted basis, the New York-based firm earned $39 million, or 24 cents, missing analysts’ estimates by a penny and remaining flat with year-earlier adjusted earnings.

Fourth-quarter sales rose slightly to $1.33 billion from $1.32 billion last year. The firm said that in the U.S. it had a “small comp-store gain in men’s footwear, low single-digit decline in women’s footwear and a mid-single-digit decline in kids’ footwear.” The company also said lower markdowns positively benefited results.

As for strong selling categories, toning and technical running shoes led the way. Toning, Hicks said, “is breathing new life into the women’s business.” He cited “strong sales gains” from Reebok’s EasyTone and Skechers’ Shape-ups in women’s.

Technical running shoes, classic styles from Converse, Puma and Adidas and marquee Kobe Bryant- and LeBron James-endorsed basketball product also sold well, Hicks said.

For the year, Foot Locker earned $48 million, or 30 cents, compared with a loss of $80 million, or 52 cents, last year. The company’s annual sales were $4.85 billion, down from $5.24 billion last year.

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