Foot Locker Profit Falls

Foot Locker's profit for the quarter totaled $44 million, or 28 cents per share, compared with $82 million, or 53 cents a share, for the comparable quarter one year ago. In last year's second quarter, results reflected an income tax benefit of $37 million, or 24 cents per share, related to discontinued operations.

"This is the first time in several quarters that we did not generate a double-digit increase in quarterly earnings per share in line with or above our usual 10% to 20% guidance," Foot Locker CEO Matthew Serra said in the conference call. Despite a sales increase of 2.8% to $1.3 billion in this year's second quarter, comparable store sales increased only 1.3%, also falling below the company's expectations.

Serra said that the second quarter profit decline at Foot Locker Europe essentially offset the combined profit increase generated by its US and other international divisions. But the company is pleased with the second quarter financial results of its Champs Sports division and expect that the Footaction business that it bought last year will help to improve financial results for the rest of the year.

The company's CFO, Bruce Hartman, also referred to the effects of a poor showing in Europe. "However, the combination of our other businesses in the US, Canada and the Asia-Pacific region performed well during the quarter, generating improved sales and divisional profits," Hartman commented.

Despite the company's concerns with Europe, Serra said Foot Locker's planned $170 million capital expenditure program remains on track, "primarily targeted toward opening and closing approximately 110 stores, remodeling and relocating more than 300 existing stores," he said. He noted that the company has increased its targeted openings for the year by 10 stores, having identified some promising locations. Counting the 10 new stores, Foot Locker expects it will end the year with 110 new locations, including 23 of its Footaction brand.

The company opened 27 new stores, remodeled or relocated 124 stores and closed 29 stores during the second quarter. That brought its total locations as of July 30 to 3,926 stores in 19 countries in North America, Europe and Australia.