Foot Locker 2012 Annual Report Download - page 42

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Athletic Stores
2012 2011 2010
(in millions)
Sales $5,568 $5,110 $4,617
Division profit $ 653 $ 495 $ 329
Division profit margin 11.7% 9.7% 7.1%
2012 compared with 2011
Athletic Stores sales of $5,568 million increased 9.0 percent in 2012. Excluding the effect of foreign
currency fluctuations, primarily related to the euro, sales from the Athletic Stores segment increased by
10.6 percent in 2012. Comparable-store sales increased by 8.5 percent. Most divisions within this segment
experienced strong increases as compared with the prior year, led by Champs Sports and domestic Foot
Locker. Foot Locker Europe had a modest comparable-store sales decline for the year reflecting the
macroeconomic conditions in that region. Lady Foot Locker’s sales declined in 2012 reflecting losses from
certain classic and lifestyle footwear, partially offset by an increase in performance footwear. Additionally,
Lady Foot Locker operated 29 fewer stores as management has continued to focus on closing
underperforming stores. Comparable-store sales for the division were down slightly for the year.
Management has continued to review the women’s business and has implemented various initiatives
intended to improve future performance, such as transitioning merchandise assortments to target the
active, performance-oriented woman and a new store design, which is currently being tested in 14 Lady
Foot Locker locations. During 2012, the Company introduced a new banner, SIX:02, an elevated retail
concept featuring top brands in fitness apparel and athletic footwear for women. The Company opened
3 SIX:02 stores during the fourth quarter of 2012 and plans to open 4 additional stores in 2013.
Management currently believes that these initiatives will improve the performance of the women’s
category over time, as the tests are studied and the actions are refined across all stores. In total, all
categories, footwear, apparel and accessories, increased during 2012. Within the footwear, the highest
percentage increase came from our kids’ category, which had strong gains across all banners, supported by
the ‘‘Go Big’’ marketing campaign. Footwear sales increased in our largest category, basketball, which
benefitted from key marquee player shoes. Despite the overall decline in Lady Foot Locker sales, our
overall women’s business modestly increased, as some of those customers found appealing product in our
other banners. Apparel sales reflected strength in domestic sales, partially offset by a slight decline in
Europe’s apparel sales.
Athletic Stores reported a division profit of $653 million in 2012 as compared with $495 million in 2011,
an increase of $158 million. During the fourth quarter of 2012 an impairment charge of $5 million was
recorded to write down long-lived assets of the CCS stores, as a result of the Company’s decision to close
these stores during the first quarter of 2013. Foreign currency fluctuations negatively affected division
profit by approximately $9 million as compared with the corresponding prior-year period. Division profit
increased primarily as a result of strong sales and an improved gross margin rate driven by improved
leverage of the fixed expenses within gross margin, contributing to an overall profit flow-through of
34.5 percent.
2011 compared with 2010
Athletic Stores sales of $5,110 million increased 10.7 percent in 2011, as compared with $4,617 million in
2010. Excluding the effect of foreign currency fluctuations, primarily related to the euro, sales from the
Athletic Stores segment increased by 8.9 percent in 2011. Comparable-store sales also increased
8.9 percent as compared with the prior year. The majority of the increase represented increased footwear
sales reflecting the continued success of key styles of technical, light-weight running, and basketball
footwear. Apparel sales continued to benefit from offerings that coordinated with key footwear styles. All
formats within this segment experienced significant increases in sales as compared with the prior year,
except for Lady Foot Locker. While Foot Locker Europe’s comparable-stores sales were positive for the
fourth quarter and full-year of 2011, sales were negatively affected by the economic conditions. Lady Foot
Locker’s sales declined in 2011, principally due to operating 47 fewer stores. This was coupled with a
decline in toning footwear sales, which negatively affected the results in the first part of the year.
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