Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 1, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-10299 (Exact name of registrant as specified in its charter) | New York | 13-3513936 | | --- | --- | | (State or other ju ...

Company Overview - Foot Locker, Inc. is a leading footwear and apparel retailer with approximately 2,400 retail stores in 26 countries across North America, Europe, Asia, Australia, and New Zealand [3] - The company has a strong history of sneaker authority and aims to ignite the power of sneaker culture through its portfolio of brands, including Foot Locker, Kids Foot Locker, Champs Sports, WSS, and atmos [3] Upcoming Event - Mary Dillon, CEO, Mike Baughn, CFO, and Frank Bracken, President, will present at the J.P. Morgan 11th Annual Retail Round Up Conference on April 3rd at 8:00 a.m. ET [1] - An audio fireside chat will be available on footlocker-inc.com on the same date and a replay will be accessible for 90 days following the event [2]

Core Insights - Foot Locker, Inc. has appointed Franklin R. Bracken as President, effective immediately, while he continues to report to CEO Mary Dillon [1][2] - Bracken will focus on executing the Lace Up Plan, which aims to enhance the omni-retail experience, improve productivity, and create long-term shareholder value [1][2] - Bracken has nearly 30 years of experience in various sectors including brand management and retail operations, and has been with Foot Locker since 2010 [2] Company Overview - Foot Locker, Inc. operates approximately 2,400 retail stores across 26 countries, including North America, Europe, Asia, Australia, and New Zealand [3] - The company is recognized for its strong sneaker authority and aims to ignite sneaker culture through its portfolio of brands, which includes Foot Locker, Kids Foot Locker, Champs Sports, WSS, and atmos [3]

I wrote about Foot Locker (NYSE: FL ) previously with a hold rating as I was worried about how gross margin would be in 4Q24 given the promotional environment. I stay hold-rated as I expect concerns regardingI am an individual investor that is now fully focus on managing my own capital that I have saved up over the years. My investing background spreads across a wide spectrum as I believe there are merits to each approach, for instance: Fundamental investing [Bottoms-up etc.], Technical investing [historica ...

Group 1 - The investment strategy focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective, rather than market-driven dynamics [1] - The articles emphasize understanding the long-term earnings power of companies and the competitive dynamics within their industries [1] - The majority of recommendations will be holds, indicating a cautious approach to market conditions and a belief that only a small fraction of companies are suitable for buying at any given time [1] Group 2 - The articles aim to provide important information for future investors and introduce a healthy skepticism towards a generally bullish market [1] - There is a clear distinction made between the author's opinions and professional investment advice, highlighting the need for readers to conduct their own due diligence [2][3]

Financial Data and Key Metrics Changes - The company reported a total sales decline of 5.8% in the fourth quarter, primarily due to the lapping of the fifty-third week in 2023, foreign currency headwinds, and store closures [48] - Total comparable sales increased by 2.6%, marking the third consecutive quarter of positive comps [48] - Gross margin expanded by 300 basis points year over year to 29.6%, driven by lower markdown levels and cost optimization programs [49][50] Business Line Data and Key Metrics Changes - Global Foot Locker and Kids Foot Locker banners led the comp increase with a 3.6% rise, supported by strong holiday sales [7][48] - Champs Sports experienced a 1.8% comp increase, marking the second consecutive quarter of positive comps since its repositioning [7][42] - The footwear category saw high single-digit comp growth, driven by strong launches from brand partners like Jordan and Adidas [31][34] Market Data and Key Metrics Changes - North America overall comps were up 3.6%, with Foot Locker North America banner achieving a 5.5% comp increase [39] - European comps increased by 1.9%, despite a competitive and promotional environment [45] - Asia Pacific comps fell by 7.6%, reflecting competitive dynamics and the winding down of operations in South Korea [46] Company Strategy and Development Direction - The company is focused on executing its Lace Up plan, which includes enhancing customer experience through store refreshes and digital improvements [10][15] - Plans for 2025 include maintaining a disciplined approach to capital investments, prioritizing customer-facing initiatives that drive returns [15][56] - The company aims to optimize its real estate portfolio, having closed over 20% of its global doors since 2019 [21] Management's Comments on Operating Environment and Future Outlook - Management noted increased consumer caution and sensitivity, impacting business performance in early 2025 [14][66] - The outlook for 2025 includes expected ongoing comp sales growth and margin expansion, despite recognizing consumer uncertainties [52][55] - Management expressed confidence in the execution of the Lace Up plan and the potential for profitable market share gains [59] Other Important Information - The company achieved $100 million in savings as part of its cost optimization program in 2024, exceeding prior expectations [13][50] - The FLX Rewards program saw significant adoption, with loyalty penetration reaching 49% of sales in North America [25][26] Q&A Session Summary Question: Can you provide more color on what you're seeing quarter to date regarding consumer behavior? - Management observed that while there was strong momentum coming out of the holiday season, consumer uncertainty began to rise in February, leading to choppy performance [64][66] Question: What are the expectations for NIKE in the near term? - Management indicated that they are closely aligned with NIKE to optimize merchandise mix and inventory levels, anticipating positive outcomes from NIKE's innovation pipeline [76][82] Question: Why aren't there bigger cost savings reflected in SG&A? - Management acknowledged that while progress has been made, the current SG&A rate is not supportive of long-term profit targets, and they will continue to work on lowering it [71][72]

Core Insights - Foot Locker's quarterly results fell short of Wall Street expectations, with total sales decreasing by 5.8% year-over-year, influenced by Gen Alpha and Gen Z's cautious spending habits and Nike's discounting strategy [1][2] - The relationship between Foot Locker and Nike remains strong despite the competitive discounting environment, with Foot Locker's CEO attributing low sales to the short-term impacts of the company's "Lace Up" strategy aimed at increasing revenue from $8 billion to $10 billion by 2026 [3] Sales and Customer Behavior - Gen Alpha and Gen Z customers are spending more during major sales events like Black Friday and Valentine's Day, but less during regular periods, reflecting their limited discretionary budgets [2] - Foot Locker's CEO noted that the younger customer demographic prioritizes sneaker purchases, which are essential to their lifestyle [2] Strategic Initiatives - The "Lace Up" strategy is a comprehensive plan that includes closing underperforming stores, diversifying the brand portfolio, revitalizing the loyalty program, and investing in customer-focused technology [4] - In the fourth quarter, Foot Locker closed 47 locations, opened 7 new stores, remodeled or relocated 21 stores, and refreshed 160 stores to enhance the in-store experience and digital capabilities [5]

Core Insights - The emergence of a "cautious consumer" is influencing spending behavior across various retail sectors, including Foot Locker, as shoppers are becoming more selective and waiting for the right purchasing moments [1][2] Financial Performance - Foot Locker's fourth-quarter sales decreased by 5.8% to $2.24 billion, while comparable sales increased by 2.6%, marking the third consecutive quarter of positive comparable sales [2] - For the full fiscal year of 2024, total revenue slipped by 2.2% to $7.99 billion [2] Strategic Initiatives - Foot Locker's Lace Up Plan, initiated in 2023, aims to modernize customer experience and operations through store refurbishments, digital expansion, and enhanced customer loyalty [3] - The company plans to close approximately 400 mall-based stores by 2026, including 200 in lower-tier malls and 200 underperforming locations in higher-tier malls, as part of its real estate strategy [4] Store Experience and Digital Transformation - The introduction of "Reimagined" stores is a key focus, with eight already opened and plans to launch an additional 80 by the end of 2025, designed to create a more immersive shopping experience [5] - A new mobile app and revamped FLX Rewards loyalty program were launched to enhance customer engagement, resulting in a 12.4% increase in fourth-quarter digital sales [6][7] Customer Engagement and Loyalty - Forty-nine percent of sales in North America during the fourth quarter were attributed to loyalty program members, highlighting the importance of loyalty rewards in consumer shopping decisions [8] - Data indicates that 41% of U.S. shoppers prioritize loyalty rewards when choosing where to shop, with 35% considering them very or extremely important [9] Future Outlook - Full-year guidance for Foot Locker anticipates a sales range of -1% to 0.5% and comparable sales growth of 1% to 2.5% [9] - The company remains focused on customer-facing investments, inventory control, and disciplined expense management to improve profitability, despite expected consumer and promotional pressures into 2025 [10]

Core Insights - Foot Locker, Inc. reported fourth-quarter fiscal 2024 results with revenues falling short of estimates while earnings exceeded expectations, indicating a mixed performance [1][4] - The company achieved positive comparable sales and gross margin improvements, driven by strategic initiatives in fiscal 2024 [2] Financial Performance - Adjusted earnings per share were 86 cents, surpassing the Zacks Consensus Estimate of 73 cents and increasing from 38 cents in the prior-year quarter [4] - Total revenues were $2,248 million, a decrease of 5.7% year-over-year, missing the Zacks Consensus Estimate of $2,328 million [5] - Comparable sales rose by 2.6% year-over-year, with global Foot Locker and Kids Foot Locker sales growing by 3.6% [5] Margin Analysis - Gross profit was $663 million, up 4.6% year-over-year, with a gross margin rate increase of 300 basis points to 29.6% [6] - Selling, general and administrative (SG&A) costs as a percentage of sales decreased by 10 basis points to 22.3%, aided by cost optimization and disciplined management [7] Store Operations - In the fourth quarter, the company opened 7 new stores and closed 47, while remodeling or relocating 21 stores and refreshing 160 locations [8] - As of February 1, 2025, Foot Locker operated 2,410 stores across 26 countries, with 224 franchised stores in the Middle East, Europe, and Asia [9] Financial Snapshot - The company ended the fiscal fourth quarter with cash and cash equivalents of $401 million, long-term debt of $441 million, and shareholders' equity totaling $2.91 billion [11] - Merchandise inventories were $1.53 billion, reflecting a 1.1% increase from the previous year [11] Future Outlook - For fiscal 2025, revenues are expected to decline by 1% to grow by 0.5%, with comparable sales projected to increase by 1% to 2.5% [13] - Gross margin is forecasted between 29.3% and 29.7%, while SG&A rate is expected to be between 24.3% and 24.5% [14] - Adjusted earnings per share are projected to be between $1.35 and $1.65, with capital expenditure estimated at $270 million [15]

Financial Data and Key Metrics Changes - Total sales decreased by 5.8%, primarily due to the lapping of the 53rd week in 2023, foreign currency headwinds, and store closures [66] - Comparable sales increased by 2.6%, in line with expectations, marking the third consecutive quarter of positive comps [66] - Gross margin expanded by 300 basis points year-over-year to 29.6%, exceeding revised expectations [68] - Non-GAAP earnings per share were $0.86, above the guidance of $0.70 to $0.80 [10][66] Business Line Data and Key Metrics Changes - Global Foot Locker and Kids Foot Locker banners led comp sales growth with an increase of 3.6% [8][66] - Champs Sports experienced a 1.8% increase in comps, marking the second consecutive quarter of positive growth since repositioning [9][58] - Apparel business faced challenges with mid-teen comp declines, while accessories saw high single-digit growth [50][52] Market Data and Key Metrics Changes - North America comps were up 3.6%, with Foot Locker North America banner achieving a 5.5% increase [55] - European comps increased by 1.9%, despite a competitive and promotional environment [62] - Asia Pacific comps fell by 7.6%, with Foot Locker banner down 7.2% due to competitive dynamics and inflation [63][64] Company Strategy and Development Direction - The company is focused on executing the Lace Up Plan, which includes enhancing customer experience through store refreshes and digital improvements [11][19] - Plans to optimize the real estate portfolio by closing underperforming stores and converting select markets to a license model [15][26] - The company aims to deepen customer relationships through loyalty programs, with FLX Rewards penetration reaching 49% of sales in North America [32][33] Management's Comments on Operating Environment and Future Outlook - Management noted increased consumer caution and sensitivity, impacting business performance in early 2025 [16][17] - The company expects ongoing comp sales growth and margin expansion in 2025, despite recognizing consumer uncertainties [72][73] - Management remains confident in the execution of the Lace Up Plan and the potential for profitable market share gains [85] Other Important Information - The company achieved $100 million in savings as part of a $350 million cost savings plan, exceeding expectations [15][69] - The company plans to refresh approximately 300 stores in 2025, building on over 400 refreshes completed in 2024 [28][29] - Digital penetration increased to 21.8% of sales, with a target of 25% by 2026 [36] Q&A Session Summary Question: Can you provide more color on what you're seeing quarter-to-date regarding consumer behavior? - Management observed that while consumers respond positively to exciting promotions, there is increased caution in between these periods, particularly among younger demographics [90][92] Question: What are the expectations for Nike's performance in the near term? - Management expressed confidence in the partnership with Nike, noting that they are focused on long-term strategies and growth plans, despite some short-term promotional challenges [113][114] Question: Why aren't there bigger cost savings reflected in SG&A? - Management acknowledged that while progress has been made, the current SG&A rate is not supportive of long-term profit targets, and they will continue to work on lowering it [99][100]