Foot Locker 2008 Annual Report Download - page 4

We entered 2008 with a view that the
pace of business in the global retail
environment would be slowing. Conse-
quently, we developed the Foot Locker,
Inc. game plan for the year with cau-
tion. We made conservative business
assumptions about consumer spending,
planned our inventory below our prior
year levels, cut back on expansion plans
and reduced our expense base through
innovative cost reduction initiatives.
Finally, we developed a strategy to
keep our balance sheet strong, with a
goal of continuing to operate our busi-
ness with low debt and high liquidity.
We believed that this plan was the pru-
dent way to approach the coming year...
and it served us well. For the most part
our organization rose to the many exter-
nal challenges that the year presented
and, as a result, generated a meaningful
year-over-year operating profit increase
(before the impact of non-cash impair-
ment charges). Additionally, we emerged
from 2008 with a strong capital structure
and are well positioned to meet the
ongoing challenges that we will likely
encounter during the coming year.
As 2008 unfolded, declining home
values, fears of job losses and ris-
ing unemployment, and decreases in
personal wealth all weakened consumer
confidence. The fall off in consumer
spending during the second half of the
year was precipitous and led to one of
the most challenging periods for retailers
in more than a generation. Furthermore,
the significant decline in consumer
spending was not concentrated in a
single market or country – it was and
continues to be international in its reach,
a trend that is likely to continue through-
out 2009.
Although the external environment
may remain challenging, new business
opportunities allowing us to expand
our market share or product offerings
may become available. For instance, our
acquisition this past year of CCS, the
leading direct-to-customers retailer in
the United States that sells skateboard
footwear, apparel and accessories, was a
unique opportunity to expand our reach
and appeal to the teenage consumer by
adding a complementary retail company
to our existing portfolio of athletic busi-
nesses.
Executing our Game Plan
We believe that the strategic initia-
tives that we undertook in 2008 have
improved our Company’s competitive
position in the global retail marketplace.
Three specific initiatives – improving our
merchandise assortments, updating the
atmosphere of our stores and enhancing
customer service – were key components
of our strategy designed to provide
a better shopping experience to our
customers. We plan to continue to focus
our efforts on advancing each of these
initiatives during the coming year with a
goal of improving the sales productivity
of our existing businesses.
Merchandise Assortments
Our merchandising improvements
during 2008 focused on:
• Increasingourassortmentsofthe
most sought-after premium athletic
footwear.
• Rebuildingourbrandedapparel
business with both existing and new,
highly recognized suppliers.
• Improvingourmerchandiseinventory
position.
The benefit to our business of imple-
menting these initiatives was meaning-
ful and is reflected in our 2008 financial
results. We generated very solid sales
increases in key premium footwear
While we did not set any records, we still emerged on the winning side in
2008 by producing strong cash flow and, on a non-GAAP basis, a mean-
ingful profit increase versus the prior year.
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Letter to Shareholders