Foot Locker (FL) is a major retailer of athletic shoes and apparel that has been adding muscle and losing fat, generating more sales and profit without expanding its international chain of stores.
The New York City company earned $131 million in the six months ended July 30, more than double its net income in the same period last year.
Sales rose in the February to July period to $2.72 billion, up almost 15 percent from first half of the last fiscal year. Comparable store sales increased 12.3 percent, year over year, in the six month period.
Foot Locker had 3,407 stores at the end of July, 19 fewer than six months earlier. The company gradually has reduced the size of its chain by more than 500 stores since early 2007. The retailer operates stores in the United States and 21 other countries under its flagship Foot Locker brand and other trade names, including Lady Foot Locker, Kids Foot Locker, and Champs Sports.
Improved profit margins have pushed more sales dollars to the bottom line. Net income as a percentage of sales increased to 4.9 percent in the six months ended in July, up from 3.3 percent in the last fiscal year and 1 percent in the prior year.
Reduced restructuring costs have helped. Foot Locker's asset impairments and other non-recurring charges dropped to $10 million in the last fiscal year from $41 million in fiscal 2010 and $259 million in fiscal 2009.
Foot Locker depends heavily on the popularity of footwear and other products from Nike (NKE). Products from the Beaverton, Ore., shoe company accounted for almost two-thirds of Foot Locker's sales in fiscal 2011. Nike's total sales increased 9.7 percent in the fiscal year ended May 31 to $20.8 billion, reversing an annual decline in sales the previous year.
Credit upgrade
Credit rating agency Moody's in early September revised its rating outlook for Foot Locker to positive from stable and affirmed all existing ratings for the retailer, including its Ba3 corporate family rating.
"Foot Locker's credit metrics have improved significantly over the past year, driven by double-digit comparable sales growth and operating margin improvements," Moody's analysts Mariko Semetko and Alexandra S. Parker wrote in a Sept. 1 report.
Foot Locker has paid cash dividends of 60 cents per share in each of the last three fiscal years. But Wall Street has a split view of the stock's appreciation potential. In early September, half of the securities analysts following the company recommended buying its stock and half of them had neutral hold ratings on the stock.
Foot Locker will release its next quarterly financial report around Nov. 18.
