Foot Locker 2007 Annual Report Download - page 30

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14
the Company evaluated the recoverability of long-lived assets considering the revised estimated future cash flows.
The Company recorded an additional non-cash impairment charge of $7 million as a result of this analysis. Exit costs
related to 33 stores that closed during 2007, comprising primarily lease termination costs of $4 million, were recognized
in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”
2006 compared with 2005
Athletic Stores sales of $5,370 million increased 1.9 percent in 2006, as compared with $5,272 million in 2005.
Excluding the effect of foreign currency fluctuations, primarily related to the euro, and the effect of the 53rd week, sales
from athletic store formats decreased by 0.6 percent in 2006. Footaction and Champs Sports significantly increased
sales, primarily from the sale of marquee basketball and running footwear. This was offset primarily by decreased sales
in Foot Locker Europe. Foot Locker Europe’s sales declined due to the continued difficult athletic retail environment,
particularly in France, the U.K. and Italy. Comparable-store sales for the Athletic Stores segment decreased by
1.1 percent in 2006.
Division profit from Athletic Stores decreased by 3.3 percent to $405 million in 2006 from $419 million in 2005.
Division profit as a percentage of sales decreased to 7.5 percent. The decrease in division profit is primarily attributable
to the Foot Locker Europe division due to the fashion shift from higher priced marquee footwear to lower priced low-
profile footwear styles and a highly competitive retail environment, particularly for the sale of low-profile footwear
styles. Included in the Athletic Stores division profit for 2006 is an impairment charge of $17 million related to the
Company’s European operations, consistent with the Company’s recoverability of long-lived assets policy. The charge
was comprised primarily of stores located in the U.K. and France. Excluding the impairment charge, Athletic Stores
division profit increased by 0.7 percent as compared with the corresponding prior-year period. The decline in Foot
Locker Europe were offset by increases in all other divisions.
Direct-to-Customers
2007 2006 2005
(in millions)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 364 $380 $381
Division profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40 $45 $ 48
Sales as a percentage of consolidated total . . . . . . . . . . . . . . . . 7% 7% 7%
Division profit margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.0 % 11.8% 12.6%
2007 compared with 2006
Direct-to-Customers sales decreased 4.2 percent to $364 million in 2007, as compared with $380 million in 2006.
Internet sales increased by 6.3 percent to $287 million, as compared with 2006. Catalog sales decreased by 30.0 percent
to $77 million in 2007 from $110 million in 2006. Management believes that the decrease in catalog sales, which was
substantially offset by the increase in Internet sales, is a result of customers browsing and selecting products through
its catalogs and then making their purchases via the Internet. Sales were negatively affected by reduced sales from
third party arrangements, as well as weakened consumer spending for athletic footwear and apparel.
The Direct-to-Customers business generated division profit of $40 million in 2007, as compared with $45 million
in 2006. Division profit, as a percentage of sales, decreased to 11.0 percent in 2007 from 11.8 percent in 2006.
The decline in division profit is a result of lower sales.
2006 compared with 2005
Direct-to-Customers sales decreased to $380 million in 2006, as compared with $381 million in 2005. Internet sales
increased to $270 million, increasing by 11.1 percent as compared with 2005. Catalog sales decreased by 20.3 percent
to $110 million in 2006 from $138 million in 2005. Management believes that the decrease in catalog sales, which
was substantially offset by the increase in Internet sales, is a result of customers browsing and selecting products
through its catalogs and then making their purchases via the Internet. Sales for the Direct-to-Customer business were
negatively affected by the termination of a third party arrangement in the early part of 2006.