Foot Locker, Inc. reported net income for the company's first quarter ended May 3, was $162 million, or $1.10 per share, compared with net income of $138 million, or 90 cents per share, last year. Wall Street's consensus estimate had been $1.06 a share. Comparable-store sales increased 7.6 percent. Total first quarter sales increased 14 percent, to $1,868 million this year, compared with sales of $1,638 million for the corresponding prior-year period. Excluding the effect of foreign currency fluctuations, total sales for the first quarter increased 13.4 percent.
"We are off to a great start in 2014, with our first quarter results representing the highest quarterly sales and profits in our history as an athletic company --- for the third consecutive year," said Ken C. Hicks, Chairman of the Board and Chief Executive Officer. "Every person in our company is playing an important role in producing our current strong performance, bringing passion, energy, and excellence to the execution of our strategies and initiatives as we work towards the achievement of our long-term financial and operational objectives."
The company's gross margin rate improved to 34.6 percent of sales from 34.2 percent a year ago, while the rate of selling, general, and administrative expenses improved to 19.0 percent of sales from 19.2 percent.
"The company executed its operating plans effectively and efficiently in the first quarter," said Lauren B. Peters, Executive Vice President and Chief Financial Officer. "We delivered results in line with or better than our expectations on just about every financial and operational metric, and we continue to test and develop opportunities we believe can improve our performance even further in the future."
Non-GAAP Adjustments
During the first quarter, the company incurred approximately $2 million of expenses related to the impairment of a trade name and Runners Point Group integration costs. Excluding these items, first quarter earnings were $1.11 per share on a non-GAAP basis, an increase of 22 percent over the record $0.91 that the company earned in the first quarter last year after adjusting for Runners Point Group acquisition costs. A reconciliation of GAAP to non-GAAP results is provided in the table below.
Financial Position
At May 3, 2014, the company's merchandise inventory was $1,268 million, 8.5 percent higher than at the end of the first quarter last year. Excluding Runners Point Group and using constant currencies, inventory increased 3.2 percent. The company's cash and short-term investments totaled $1,007 million, while the debt on its balance sheet was $138 million.
The company spent approximately $70 million to repurchase 1.53 million shares during the quarter.
Store Base Update
During the first quarter, the company opened 27 new stores, remodeled/relocated 49 stores and closed 36 stores. As of May 3, 2014, the company operated 3,464 stores in 23 countries in North America, Europe, Australia, and New Zealand. In addition, 47 franchised Foot Locker stores were operating in the Middle East and South Korea, as well as 27 franchised Runners Point and Sidestep stores in Germany and Switzerland.
