Foot Locker 2004 Annual Report Download - page 4

1974
•First Foot Locker store
opens in Puente Hills
Mall in City of Industry,
California.
1977
•First Foot Locker
commercial airs.
1979
•139 Foot Locker stores.
•Foot Locker Cross
Country
Championships
founded.
S HAREHOLDERS ’L ETTER
In many respects, 2004 was a milestone
year for our Company, from celebrating
the 30th anniversary of the opening of our
first Foot Locker store in City of Industry,
California, to opening our first Foot
Locker store in the Republic of Ireland. It
was also a year of continued momentum
and strong financial performance for our
Company. The progress we made in 2004,
including our expanded global store base
and improved array of merchandise, posi-
tions us for additional success in the
future.
The year 2004 can be summarized as
follows: our sales broke through the
$5 billion mark and, by year's end, we
were operating nearly 4,000 stores world-
wide. Moreover, Foot Locker, Inc. signifi-
cantly increased its net income per share
and increased shareholder value by using
its strong cash flow to reinvest in the
business and pay increased dividends. In
addition, most of our key financial meas-
urements – including sales per average
gross square foot, operating profit, net
income and shareholders' equity – have
increased meaningfully. Our pride in our
consistent and improving results is
matched by our total dedication to
enhancing value for our shareholders over
the long term.
2004 Year in Review
Earlier this decade, the Company estab-
lished two key financial objectives:
increasing our annual sales per average
gross square foot to $350 and reaching an
operating profit margin of 8.5 percent.
We made significant strides towards
attaining these objectives in 2004 –
achieving annual sales per average gross
square foot of $345 and an operating
profit margin of 7.3 percent – and believe
these goals are within our grasp. As a
result, we are now targeting our longer-
term goal of a 10 percent operating prof-
it margin, a goal we aim to achieve with-
in the next several years.
Our confidence is underpinned by the
financial results that we have delivered.
Our sales increased significantly in 2004,
reaching $5.4 billion, a 12 percent
increase from $4.8 billion in 2003. More
importantly, income from continuing
operations increased 22 percent in 2004
to $255 million.
Disciplined fiscal management
remains a cornerstone of our strategy. We
continue to strengthen our financial posi-
tion while building our Company's future
and our shareholders' returns. The
Company ended 2004 in a strong financial
position, with total cash and short-term
investments of $492 million. Our busi-
nesses continue to generate strong cash
flow that we are carefully redeploying to
deliver increased value for our sharehold-
ers by:
• Investing in worldwide growth
• Enhancing the productivity of existing
businesses
• Strengthening our balance sheet
• Providing a meaningful cash return to
our shareholders
Investing in our Worldwide Growth
This past year was significant not just for
our strong financial results, but also for
our strategic accomplishments. First and
foremost, investing in meaningful world-
wide growth for our Company is essential
to our future.
In 2004, we completed the acquisition
of two important businesses – the 349-
store Footaction chain in the United
States, and 11 athletic stores in the
Republic of Ireland. We expect the finan-
cial returns from these acquisitions to
exceed our cost of capital by a meaning-
ful margin and profits to be accretive to
earnings per share in 2005 and beyond.
The Footaction brand, which is well
known across the United States, is antic-
ipated to be complementary to our exist-
ing businesses and important in generat-
ing top-line growth. Footaction's value to
This past year was significant not just for our strong financial results,
but also for our strategic accomplishments.
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