Foot Locker 2005 Annual Report Download - page 5

Positioned To Win
As we move forward, we have a number of
growth priorities underway that we are
confident will position our Company for
continued market leadership, strong
financial performance and delivery of
greater value to our shareholders.
The Company's first growth priority is
to fund capital projects designed to
enhance our existing business. During
2005, the Company spent approximately
80 percent of its $163 million capital
expenditures on store maintenance,
remodels and relocations, as well as
enhancements to our infrastructure and
sales support systems. The remaining 20
percent of the Company's 2005 capital
expenditure program was allocated to
opening new retail stores. During the year
we completed 600 real estate projects,
opening 119 new stores, remodeling and
relocating 316 stores, and closing 165
stores.
Acquiring compatible athletic
footwear and apparel retail companies is
another growth priority for our Company.
During the prior year, we explored sever-
al potential acquisition opportunities
that we believe could be a strategic fit
with our Company. We plan to continue to
pursue carefully acquisition opportuni-
ties, maintaining a patient posture to
ensure that potential investments are
accretive to our earnings per share and
generate a rate of return well in excess of
our cost of capital.
We continually seek new opportunities
to grow our Company profitably, while
prudently maintaining a conservative --
yet efficient -- capital structure designed
to minimize our cost of capital. Reducing
our financial liabilities and strengthening
our balance sheet are important consider-
ations as we strive to attain an invest-
ment-grade credit rating. With this prior-
ity in mind, during 2005 we repaid $35
million of long-term debt and contributed
$26 million to our pension plans.
Our Board of Directors is also commit-
ed to enhancing shareholder value
through both capital appreciation and
dividends. Thus, in November 2005, the
Board of Directors increased the cash div-
idend on Foot Locker, Inc.'s common
stock by 20 percent, to an annualized
amount of $0.36 per share, reflecting
confidence in the ability of management
to continue to increase the Company's
profitability. During the second quarter of
2005, we began to implement a share
repurchase program, with 1.6 million
shares purchased for the full year at a
cost of $35 million. Additionally, the
Board of Directors authorized in February
2006 a new three-year $150 million share
repurchase program that may be imple-
mented based upon market prices and
other factors.
Game Plan -- Expanding Our Reach
Looking to the future, we believe we have
many opportunities to accelerate our
growth by expanding the reach of our
business into both new and existing mar-
kets. We expect that these opportunities
will include the continued implementa-
tion of the growth strategy that we have
been successfully executing for several
years, as well as the development of new
initiatives that will allow us to reach a
larger and more diverse customer base.
An integral part of this growth strate-
gy is our real estate program, first
embarked upon in 2001, and geared at
opening 1,000 new stores over several
years. In line with this strategy, we
opened or acquired 961 new stores over
the past five years, while also closing 622
underperforming stores. During this time,
we also expanded our store base into six
new countries, including Greece and
Switzerland this past year.
As we look toward 2006, we have
increased our capital expenditure plan to
$190 million. This will enable us to accel-
erate our store openings to approximate-
ly 175 new stores and to expand our
reach by testing new markets. We esti-
mate that 80 percent of the new stores
will be located in the United States and
20 percent in international markets.
During 2006, we also plan to close
approximately 110 underperforming
Gross Square Footage
Store Summary 2005 2006
January 29, January 28, Remodeled/ Average Total Targeted
2005 Opened Closed 2006 Relocated Size (thousands) Openings
Foot Locker 1,428 45 75 1,398 124 4,000 5,626 50
Footaction 349 24 10 363 40 4,700 1,718 20
Lady Foot Locker 567 8 21 554 19 2,200 1,241 25
Kids Foot Locker 346 1 20 327 39 2,400 791 20
Foot Locker International 707 30 14 723 38 2,900 2,062 35
Champs Sports 570 11 25 556 56 5,500 3,045 25
Total 3,967 119 165 3,921 316 3,700 14,483 175
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