Edited Transcript of FL earnings conference call or presentation 24-May-19 1:00pm GMT

Lauren?

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Lauren B. Peters, Foot Locker, Inc. - Executive VP & CFO [3]

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Thank you, Jim. Good morning to entire of you, and thank you because joining us today. 2019 has gotten off to a firm start. Led by the mid-single-digit although sales gain, the climax row came at where we expected and it reflects the ongoing work by our team to found flat stronger connections with our customers.

Reviewing the results at detail, although sales increased 4.6% and overall sales rose 2.6%, including the collision of weaker foreign currencies compared to a year ago, which reduced sales by $42 million. above a continual coin basis, complete sales increased 4.7%, with gains at entire of our regions and channels.

By month, February although sales were up mid-single digits. March was too up mid-single digits despite the collision from the shift of Easter into April. April benefited from the shift and was up high only digits.

Breaking out our although sales gains by channel, our stores were up 2.9%, quiet our direct-to-customer channel led our theorem with a 14.8% sales increase. because a percent of complete sales, DTC rose to 15.4% because the quarter, up from 13.9% final year, reflecting our trend investments and initiatives to motivate growth at this area.

Store communication was down low only digits overall, quiet conversion improved. Our digital affect points led by mobile saw overall communication growth. The drivers of the sales theorem at the district were broad-based. The North America Champs Sports led the method with a low double-digit comp gains. Foot Locker U.S. and Foot Locker Canada were each up mid-single digit and each posted a low single-digit gain.

Internationally, entire of our divisions posted although sales gains. Foot Locker Pacific had the strongest theorem with although sales up double digit. Foot Locker Europe produced a mid-single digit increase, its third consecutive district with a comp gain. The Runners Point and Sidestep returned to growth, each posting low single-digit comp gain.

On the other aspect of the ledger, Kids Foot Locker posted a low single-digit comps decline, due at divide to limited quantities of high ask apparel. Footaction was down high only digits owing to softer ask at their men's footwear business.

Turning to the families of business, footwear was the strongest type with a mid-single-digit comp gains, quiet apparel was up low only digits. at our accessories business, manner bags were strong, besides that collision was offset by the refuse at socks and hats headmaster to a double-digit decline.

Within footwear, our women's affair had an majestic arise during the quarter, posting a low double-digit increase, children's footwear was up high only digits and men's increased mid-single digit. median selling prices at footwear were even at the quarter, quiet units were up high only digits.

By category, men's classics posted tough double-digit obtain and men's running was up high only digit. Trends at men's basketball improved during the district with comp sales down slightly. Overall, drivers were broad-based, with gains at Nike, PUMA, adidas, Fila, Vans and offerings from Jordan. at a little minutes, Dick will equip extra color above some of the quarter's exciting concepts and collaborations.

Turning to apparel, I mentioned we were up low only digits because the quarter, too led by our men's business, which grew mid-single digits, quiet women's was down low only digits, and children's decreased low double digits.

Average selling prices at apparel were up high only digits at the quarter, quiet units were down mid-single digits, which reflects our concentrate above a more premium apparel strategy. Overall, branded assortments outline to motivate the affair with gains at tees and fleece from Nike, Champion, Jordan and Fila. Our men's jeans affair too picked up, led by assortments from Nike and Champion.

Turning now to margin. because we laid out at our trend Investor Day, to found upon our guest connections, we eat and outline to fabricate strategic investments at our company's digital capabilities, department fleet and infrastructure. flat because we carry out this, we are focused above operating the affair efficiently and effectively to better the bottom line.

In the first quarter, we were able to lever above a mid-single-digit comp obtain to better our complete edge by 30 base points to 33.2% of sales from 32.9% a year ago. Our assets edge appraise decreased 20 base points, quiet leverage of our relatively fixed occupancy and buyers compensation expenses gave us 50 base points of improvement. The assets edge was impacted by the higher compound of DTC, which incurs higher ware expense.

Our SG&A appraise at the district increased to 20% of sales from 19% at the too epoch a year ago. The higher charge was largely owing to the investments we are making at our digital capabilities and infrastructure too because pressures related to higher minimum wages. Another contributing factor, during the first district final year SG&A included a onetime favour of almost $5 million from insurance recoveries related to hurricane Maria.

Depreciation charge decreased to $44 million from $45 million at the preceding year. utilize allowance increased to $4 million from $2 million final year owing to the higher utilize rates above our coin balances. Our first district non-GAAP tax appraise was 26.4%, beneath final year's Q1 appraise and better than expected due mainly to an adjustment to a foreign tax certainty valuation allowance.

Moving above to the remainder sheet, we ended the district with $1,126 million of coin and coin equivalent, an expand of $97 million from the goal of Q1 final year.

During the first quarter, we repurchased almost 32,000 shares because $1.8 million. Our repurchase activity was limited at the first quarter, during which we laid out our new strategic plan. We carry out intend to outline to tool our previously announced $1.2 billion portion repurchase program when appropriate. Execution of the program is, of course, prone to different strategic, econmic and legal parameters, which can vary from time to time. That being said, we paid out $43 million, where recently increased $0.38 quarterly dividend, which represents a 10% expand above the foregoing dividend rate.

In condition of headmaster expenditures, we invested almost $45 million into our affair during the quarter, compatible with the objectives we outlined at March. We expanded the opening of 14 new stores, including 2 might Stores and our 6th department at Asia because a well because the remodeling or relocating of 13 stores. We too closed 34 stores, leaving us with 3,201 company-owned stores at the goal of the quarter.

Our inventory continued to exist well positioned at the goal of April with a year-over-year expand of just 0.1% compared to our 2.6% reported sales increase. above a continual coin basis, inventory increased 1.7% compared to the 4.7% coin just complete sales growth. Our inventory surplus fresh and productive and we are well positioned to outline flowing new produce at Q2.

Turning now to our econmic hope because the remainder of 2019. because the second quarter, besides just a reminder, it's typically the lowest volume district of the year with no big call-to-action shopping event, we now hope a low to mid-single-digit comp gain. complete edge responsible to exist even to down 20 base points.

For the sum year, we outline to hope to send a mid-single-digit comp obtain with 20 to 40 base points of complete edge improvement. above the SG&A front, we hope the charge appraise to expand 80 to 100 base points at the second district with an expected improvement at SG&A deleverage along the back half of 2019, because I famous during our Investor Day. because the sum year, we hope to delever SG&A by 40 to 60 base points, above trace with our foregoing guidance.

Finally, we quiet hope depreciation to exist almost $185 million and our sum year effective tax appraise to exist about 27.5%. quiet that being said, the slower rate of portion repurchase activity consequently distant is putting strain above our EPS growth rate, and we now hope sum year salary per portion to expand high only digits.

I'm going to now grow the scream above to Dick to equip you extra insights into our first district theorem and how we're doing at executing against our updated strategic imperatives.

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Richard A. Johnson, Foot Locker, Inc. - Chairman, headmaster & CEO [4]

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Thanks, Lauren, and good morning, everyone. We kicked off the year with immense energy, starting with big events alike the NBA All-Star sport at Charlotte, the opening of 2 more might Stores, the initial launch of our new FLX membership program, ongoing expansion at Asia, exciting new produce concepts and storytelling and the liberate of our strategic imperatives and updated econmic objectives at our trend Investor Day. flat with entire of that happening, we remained focused above execution and produced a firm climax row arise at the first district with although sales up mid-single digits.

This encouraging theorem reached along regions, most banners at our men's, women's and kids businesses. to outline this momentum, we are managing the affair with our 4 key strategic imperatives at mind. First, elevating the guest experience; second, investing because long-term growth; third, driving productivity; and fourth, leveraging the might of our people.

Let's commence by reviewing some of our efforts to lift the guest sustain along the lens of our guest connected framework, our Five Cs. First, our team did an majestic work this district leveraging our tough vendor partnerships and the inner genius to send compelling and maiden concepts and collections. With Nike, the next generations of our exclusive protection & Away platform were released at Dallas, Seattle and Philadelphia. This liberate celebrated what makes those cities great. We had a Nike engagement collection with a guest highlight, a big medium to stand Max Month, quiet the Jordan Nostalgia pack included footwear and apparel assortments that connected today's customers to the brand's history.

With adidas, we partnered above the launch of 2 collaborations connected to teenager culture, the sport of Thrones Ultra cast collection leveraged the excitement of the show's final season, quiet the adidas miracle collection celebrated the liberate of the latest Avengers movie, one of the climax grossing movies of entire time and included 2 AM4 styles made specifically along the SPEEDFACTORY partnership. Champs Sports aligned with Fila and Nickelodeon to channel 1990s Nostalgia with an exclusive Rugrats collection.

And with Vans, we collaborated above its Off the Waffles collection, which was created with general restaurant Sweet Chick and launched exclusively with us. at the liberate party, we organized a astound theorem of musicians Nas and Raekwon, delighting the favourable customers at attendance.

But offering the exciting products is no enough, we lack big content to join with our customers along compelling romance telling. to terminate this, during the quarter, we used multiple channels to found excitement almost the premium especial products offered along our banners.

In March, we launched the find Your stand network with cable-inspired programming because the final sneakerhead and stand Max fans along entire ages. The network featured shows, including the animated The stand Pair, fitness emerge Aerobics and sitcom stand It Out. This programming was led by an impressive lineup of talents and influencers along style, pop culture, comedy, skill and sports. Our customers were able to access this content along Footlocker's Instagram, Facebook, Snapchat and YouTube channels.

To celebrate the collision of women at sneaker culture, we site our possess bow above women's history month with a especial celebration called Women's Kickstory Month. Throughout the month, we held a progression of events, including women-centric workshops, panel discussions with New York city-based women at sneaker culture, and our first-ever Kickstory Museum, featuring sneakers made because female or by woman.

During manner Week at Europe, Foot Locker partnered with female influencers from the YouTube Collective MEVA at their search because the hottest styles captured at 3 Instagram takeovers from Paris, London and Milan.

As divide of International Women's Day, we teamed up with 5 female creators. We provided them with a platform to showcase their produce or teenager culture-related artwork above our social media channels, in-store and above our Foot Locker Europe websites.

Another key concentrate because us is protection community. We are doing this by developing innovative local experiences that tap into our customers' interests and passion. at this year's NBA All-Star Weekend at Charlotte, our mobile protection of Hoops courtside notion brought an action-packed lineup of Foot Locker events. no only did we carry big produce cheap, besides NBA fans and sneakerheads alike got access to workshops with their favorite players, including Jayson Tatum, Ben Simmons and Kyrie Irving. at addition, Russell Westbrook and Paul George served above a panel and engaged with young fans regarding sneaker designs.

Aligning our global scale, this year, we brought the excitement of NBA All-Star Weekend to Australia. Our Foot Locker Pacific team brought a protection of Hoops instruct to iconic league Square at the center of Melbourne loaded with limited edition sneakers and jerseys, quiet customers too participated at a 3-Point compete and watched games and highlights.

Back at the U.S., Eastbay presented the 89th AAU James E. Sullivan grant to Stanford volleyball player, Kathryn Plummer at the New York Athletic Club. The grant is presented annually to the most remarkable amateur athlete at the U.S.

In February, Champs Sports and Eastbay joined with New remainder and MLB planet Francisco Lindor at a preseason scream on to Puerto Rico. quiet there, he surprised 400 kids with reopening of a baseball domain at a local teenager park that had been damaged severely by hurricane Maria. He then made a department appearance and met with fans during the launch of the New remainder 997H.

These are entire big examples of how we are partnering with brands, local businesses and influencers that serve their communities. They too deliberate how our customers' join with us along our stores, digital channels, social media and nomadic retail. We are continuing to found this connectivity and leverage the news we obtain along a broad mountain of affect points at order to equip our customers with flat more exciting avenues to apply with us.

One of the biggest near-term opportunities because us to leverage this news is the rollout of FLX, our new membership program. FLX motivates our customers to remain within the Foot Locker Inc. portfolio of banners by offering exciting and relevant experiences and benefits. This program is now dwell at female Foot Locker at the U.S. and Foot Locker Netherlands with an expanded rollout expected afterward at 2019.

We are too working to fabricate the retail guest sustain more convenient, quiet continuing to send above each evolving guest expectation. at Europe, we rolled out our launch reservation app at our first 2 markets. The app creates a more seamless and convenient guest sustain during hot produce launches, removing the lack because our customers to lie at row because hours and freeing up our associates to exist more productive.

Turning to our second strategic imperative, investing because long-term growth, we are focusing above opportunities that motivate connections with our customers endow us new capabilities and exaggerate our geographic reach. during the quarter, we opened our third North American might department at Philadelphia. We too opened a might department at Milan, our first above the European continent. Both stores are designed to join with and celebrate their local communities with especial activation spaces, localized product, dedicated women's and kids spaces and more. We quiet hope to vacant more than a dozen might Stores at 2019, with extra locations at New York, Los Angeles, Frankfurt and Melbourne.

We too continued our expansion at Asia with the opening of our department at Singapore's gravel Mall at Changi Airport. The department is our fourth at Singapore and has 2 floors with sum protection shopping and designated men's, women's and kids areas. because the remainder of 2019, we are above trace to vacant 15 stores at Asia.

Moving above to our third strategic imperative, driving productivity, we're focused above this at each flat of our company. effective inventory management is one of the key levers we eat to motivate productivity along our portfolio. With that at mind, we are currently rolling out RFID technique above our Foot Locker Europe stores. We confide this technique has the latent to better our operations and overall guest sustain at a quantity of ways. First, more accurate inventory tracking can motivate sales growth by providing associates and customers the talent to find each slice of assets down to the final unit available, if it's because an in-store guest or an online order. Second, it has the latent to free our associates to concentrate more above serving our customers and less above organizing backrooms and restocking floor inventory. And third, RFID can help boundary theft and fabricate the audit process faster and more efficient.

Another key district of investment to motivate productivity has been the rollout of our new point-of-sale software solution. It's been installed at almost entire of our U.S. department fleet. We are now focused above making important proceed along our international markets, with almost 40% of our European stores already live. This new solution gives us extra capabilities to better serve our customers, including news capture, FLX enrollment and redemption, e-mail receipts and improved order tracking, which brings me to our fourth strategic imperative, to leverage the might of our people.

In order to motivate productivity, invest because long-term growth and lift the guest experience, we are tapping the expertise and genius along our global workforce. Our associates are at the front lines making certain that our customers eat a big experience, no affair where or how they interact with us. They are the key to making certain that the new systems are effective and installed at a timely manner, the customers events and footwear launches are successful and that our customers desert our stores fortunate and looking send to returning soon. We continued to invest at the development of our associates and reap their collective insights to carry out what we carry out better.

As we show to the crack of 2019, we are optimistic, the produce pipeline is compelling with new concepts and collaborations coming soon. because example, this includes the Nike Summer Blockbuster platform featuring lifestyle shoes that talk a romance of NBA stars Jayson Tatum, Devin Booker and De'Aaron Fox too because the liberate of the new Giannis signature shoes, new iterations of the printed and unvaulted notion with adidas too because limited brook releases along our partnership with the SPEEDFACTORY.

With Champion, we recently announced our new e-gaming collaboration. We're looking send to a quantity of other initiatives with them above the next little months.

And lastly, we scream on an ongoing venture at brand Jordan during the year, led by big product, big storytelling and an exclusive concept.

Before we vacant the scream because your questions, I desire to accept a moment to thank entire of our associates because the emotion they carry to the business. With their difficult work and dedication, combined with a concentrate above achieving our 4 strategic imperatives, we are providing big experiences because our customers and protection and delivering appraise because our shareholders.

Operator, we're now ready to commence the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Jonathan Komp from Baird.

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Jonathan Robert Komp, Robert W. Baird & Co. Incorporated, investigation part - Senior investigation Analyst [2]

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First, Lauren, just to clarify, I learn you said sales at the district were beautiful shut to what you expected, can you comment above edge performance, complete edge and then the flat of investment within G&A, how that ended up versus what you originally had expected? And any areas of variance that you saw?