Foot Locker 2004 Annual Report Download - page 5

our Company has been enhanced through
the successful integration of its operation
into the Foot Locker infrastructure.
We are also excited about our expan-
sion into the Republic of Ireland, the 14th
European country in which we operate
retail stores. We believe Europe continues
to offer the most exciting opportunities
for sales and profit growth over the next
several years, and as a result, we plan to
continue opening new Foot Locker stores
in strategic locations across this region.
Looking farther afield, we believe that
the Asia/Pacific region presents an excel-
lent opportunity for growth over the
longer term.
Productivity Enhancements
Aggressive global growth was only part of
the bigger picture. We also continued to
focus on implementing several strategies
designed to enhance the sales and profits
of our existing businesses. These ongoing
productivity enhancements are aimed at
the compatible goals of driving increased
sales per average gross square foot and
decreasing the Company's operating
expenses as a percentage of sales.
Our success as a retailer depends on
meeting the needs and wants of our cus-
tomers. We at Foot Locker have long prid-
ed ourselves on providing best-in-class
customer service. During 2004, we took
several steps to enhance our future com-
parable-store sales by implementing new,
and improving existing, programs
designed to attract new customers while
better serving existing ones. These initia-
tives include a new loyalty card program,
enhanced gift card presentations and an
automated stock-locator system, each of
which were intregrated within the new
point-of-sale system that we finished
installing in our U.S. stores this year.
Meeting the needs of our customers
also depends on providing an attractive
store environment in a convenient loca-
tion. During 2004, Foot Locker, Inc. com-
pleted over 750 real estate projects.
These projects included acquiring 360
stores, opening 96 new stores in strong
consumer markets, closing 99 underper-
forming older stores, and relocating and
remodeling 225 stores to right-size and
enhance their appearance. We have also
worked with our landlords to optimize the
tenancy-cost structure of additional
stores. As a result, our total occupancy
costs, as a percentage of sales, decreased
versus last year.
In 2004, we also continued to work
aggressively toward reducing our selling,
general and administrative expenses as a
percentage of sales. Our success in meet-
ing this objective resulted from the col-
lective efforts of our associates world-
wide. We are committed to an ongoing
effort aimed at containing the growth of
our operating expenses to a rate below
that of our sales increases.
Strengthening our Balance Sheet
Another ongoing key objective has been
strengthening our Company's financial
position in an effort to achieve an invest-
ment-grade credit rating. We have made
great strides towards this objective in
2004:
• $150 million of 5.5% convertible
notes were converted to equity
• Federal income tax return examina-
tions through fiscal 2003 were com-
pleted, resulting in a $47 million
reduction of income tax liabilities
• The Company's underfunded pension
liability was reduced by $71 million
• $200 million revolving credit facility
was amended and restated, with its
term extended to 2009
• New five-year, $175 million term loan
was negotiated with our existing bank
group
1982
•First Lady Foot Locker store
opens.
1984
•619 Foot Locker stores;
122 Lady Foot Locker stores.
1986
•867 Foot Locker stores; 244
Lady Foot Locker stores.
1987
•First Kids Foot Locker store
opens.
•Foot Locker runs two Super
Bowl commercials.
•Champs Sports is acquired.
•First European Foot Locker store
opens in Germany.
Gross Square Footage
Store Summary 2004 2005
January 31, January 29, Remodeled/ Average Total Targeted
2004 Acquired Opened Closed 2005 Relocated Size (thousands) Openings
Foot Locker 1,448 — 20 40 1,428 138 4,100 5,809 35
Footaction — 349 4 4 349 6 4,800 1,683 20
Lady Foot Locker 584 — 2 19 567 22 2,200 1,265 5
Kids Foot Locker 357 — 1 12 346 10 2,400 837 5
Foot Locker International 640 11 64 8 707 9 2,800 2,013 25
Champs Sports 581 — 5 16 570 40 5,600 3,173 10
Total 3,610 360 96 99 3,967 225 3,700 14,780 100
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