Athletic footwear and apparel retailer Foot Locker, Inc. (FL), Friday announced the consolidation of its Lady Foot Locker business under the management of its Foot Locker U.S., Kids Foot Locker and Footaction businesses. The company will also close 117 stores in the fourth quarter and slash 120 jobs.
Foot Locker, which operates through two segments, Athletic Stores and Direct-to-Customers, said the reorganization was part of a new, comprehensive strategic plan that is expected to be completed and announced in early fiscal 2010. The New York-based company also indicated Richard Johnson as the President and Chief Executive Officer of the newly consolidated businesses.
Johnson, currently, President and Chief Executive Officer of the company's Foot Locker Europe operation, will move from this position with immediate effect. The company also promoted Lewis Kimble to succeed Johnson as President and Chief Executive of Foot Locker Europe. Kimble was serving as Managing Director of the company's Foot Locker Asia/Pacific division.
Commenting on the reorganization, Ken Hicks, President and Chief Executive Officer of Foot Locker, stated, "It will allow us to sharpen our focus on the female consumer, as we look to improve the coordination of our women's merchandise assortments and marketing strategies across each of our Foot Locker brands."
Hicks has recently been appointed to the additional position of Chairman of the Board, effective January 31. Hicks will succeed Matthew Serra, who will retire from the company and the Board of Directors on January 30.
The company said it expects to incur an after-tax charge of $3 million, or $0.02 per share, in the fourth quarter, reflecting the costs associated with the elimination of approximately 120 home office and field management positions.
Foot Locker also stated that it is completing its real estate actions for fiscal 2009, working in partnership with its landlords. For the full-year, the company currently expects to open 37 new stores, close 190 under-productive stores, and remodel or relocate 160 stores. As a result, 117 stores are planned to be closed during the fourth quarter, majority of them being Foot Locker and Lady Foot Locker stores in the U.S.
Foot Locker operates about 3,600 stores in North America, Europe and Australia.
Further, Foot Locker said its financial results in 2010 are expected to improve with annual expense savings of approximately $10 million, driven by the divisional reorganization, as well as some corporate staff reductions undertaken to improve corporate efficiency.
For the recently closed third quarter, Foot Locker reported a loss, compared to a profit last year, hurt by a non-cash impairment charge related to the write down of long-lived assets of its U.S. operations. Net loss for the quarter was $6 million, or $0.04 per share, versus a net income of $24 million, or $0.16 per share, in the prior-year quarter. Sales decreased 7.3% to $1.21 billion from $1.30 billion last year. Third-quarter comparable-store sales also declined 8.2%.
According to a 2009 report on the U.S. athletic retail market by research information firm Research and Markets, the market has been affected by the economic recession. A key issue being faced by the U.S., the largest sporting goods market in the world, is rising raw material prices and labor costs.
The report indicated the sporting goods industry as highly fragmented. While major retailers are restricting store growth and reducing their presence in underperforming or over-saturated markets, smaller and financially weak companies could be forced to exit the market in future. Analysts are expecting market stabilization over the next few months but not a quick recovery, the report said.
FL is currently trading at $11.90, up $0.08 or 0.68%, on a volume of 0.63 million shares on the NYSE.
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