10-K 1 floc20240203_10k.htm FORM 10-K floc20240203_10k.htm
0000850209 Foot Locker, Inc. false --02-03 FY 2023 1 0 1 0 0 0 5 4 8 3 3 3 19 0 0 94,283,984 93,396,901 60,308 1,489 50 3 10 2 5 0 478 290 0 3.0 4.8 3 3 65 0 11 11 3 5 3 10 21.60 30.98 36.49 46.64 53.61 58.94 62.02 72.83 3 1 1 false false false false Represents the weighted-average useful life as of February 3, 2024 and excludes those assets that are fully amortized. Corporate expense for all years presented reflects the reallocation of expense between corporate and the operating divisions. Based upon annual internal studies of corporate expense, the allocation of such expenses to the operating divisions was increased by $19 million for 2022 and $28 million for 2021, thereby reducing corporate expense. No change was made during 2023. This represents adjustments made to PSU awards reflecting changes in estimates based upon our current performance against predefined financial targets. Includes cash equivalents of $40 million, $41 million, and $48 million as of February 3, 2024, January 28, 2023, and January 29, 2022, respectively. See Note 4, Impairment and Other for additional information on these amounts. The change in the ending balances reflect the derecognition of fully amortized leases during 2023 and the effect of foreign currency fluctuations due primarily to the movements of the Yen in relation to the U.S. dollar. Represents cash capital expenditures for all years presented. The rate of compensation increase for 2023 relates only to Canadian pension plan, as the other plans are frozen. Includes a non-cash impairment charge of $9 million and $8 million recorded in 2023 and 2022, respectively, see Note 4, Impairment and Other. The carrying value of debt for both periods reflected $5 million of issuer’s discount and costs related to 4% Notes due in 2029. See Note 5, Other (Expense) Income, net for additional information on these amounts. 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 Table of Contents



Washington, D.C. 20549


FORM 10-K 


(Mark One)



For the fiscal year ended February 3, 2024




 ​   ​

For the transition period from                   to                  

Commission File No. 1-10299


​(Exact name of registrant as specified in its charter)


New York


(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

330 West 34th Street, New York, New York


(Address of principal executive offices)

(Zip Code)


Registrants telephone number, including area code: (212) 720-3700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class


Trading Symbol(s)


Name of each exchange on which registered

Common Stock, par value $0.01




New York Stock Exchange


Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   ☒   No   ☐


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   ☐   No   ☒


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No   ☐


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐


Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.


If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. 


Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No ☒


The number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding as of March 21, 2024:


The aggregate market value of voting stock held by non-affiliates of the registrant computed by reference to the closing price as of the last business day of the Registrant’s most recently completed second fiscal quarter, July 29, 2023 was approximately:



*    For purposes of this calculation only (a) all non-employee directors plus six executive officers and owners of 5% or more of the registrant are deemed to be affiliates of the registrant, and (b) shares deemed to be “held” by such persons include only outstanding shares of the registrant’s voting stock with respect to which such persons had, on such date, voting or investment power.




Portions of the registrant’s definitive Proxy Statement (the “Proxy Statement”) to be filed in connection with the Annual Meeting of Shareholders to be held on May 21, 2024: Parts III and IV. ​








Item 1.



Item 1A.

Risk Factors


Item 1B.

Unresolved Staff Comments

Item 1C.   Cybersecurity 15

Item 2.



Item 3.

Legal Proceedings


Item 4.

Mine Safety Disclosures


Item 4A.

Information about our Executive Officers





Item 5.

Market for the Company’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities


Item 6.

Selected Financial Data


Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations


Item 7A.

Quantitative and Qualitative Disclosures About Market Risk


Item 8.

Consolidated Financial Statements and Supplementary Data


Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


Item 9A.

Controls and Procedures


Item 9B.

Other Information


Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections





Item 10.

Directors, Executive Officers, and Corporate Governance


Item 11.

Executive Compensation


Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters


Item 13.

Certain Relationships and Related Transactions, and Director Independence


Item 14.

Principal Accounting Fees and Services





Item 15.

Exhibits and Financial Statement Schedules


Item 16.

Form 10-K Summary













This Annual Report on Form 10-K includes "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "seeks," "continues," "feels," "forecasts," or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," "may," "aims," "intends," or "projects." Statements may be forward looking even in the absence of these particular words.


Examples of forward-looking statements include, but are not limited to, statements regarding our financial position, business strategy and other plans and objectives for our future operations, and generation of free cash flow. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. The forward-looking statements contained herein are largely based on our expectations for the future, which reflect certain estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions, operating trends, and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. As such, management’s assumptions about future events may prove to be inaccurate.


We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events, changes in circumstances, or otherwise. These cautionary statements qualify all forward-looking statements attributable to us, or persons acting on our behalf. Management cautions you that the forward-looking statements contained herein are not guarantees of future performance, and we cannot assure you that such statements will be realized or that the events and circumstances they describe will occur. Factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements herein include, but are not limited to, a change in the relationship with any of our key suppliers, including access to premium products, volume discounts, cooperative advertising, markdown allowances, or the ability to cancel orders or return merchandise; inventory management; our ability to fund our planned capital investments; execution of the Company's long-term strategic plan; a recession, volatility in the financial markets, and other global economic factors, including inflation; capital and resource allocation among our strategic opportunities; our ability to realize the expected benefits from acquisitions; business opportunities and expansion; investments; expenses; dividends; share repurchases; cash management; liquidity; cash flow from operations; access to credit markets at competitive terms; borrowing capacity under our credit facility; cash repatriation; supply chain issues; labor shortages and wage pressures; consumer spending levels; licensed store arrangements; the effect of certain governmental assistance programs; the success of our marketing and sponsorship arrangements; expectations regarding increasing global taxes; the effect of increased government regulation, compliance, and changes in law; the effect of the adverse outcome of any material litigation or government investigation that affects us or our industry generally; the effects of weather; ESG risks; increased competition; geopolitical events; the financial effects of accounting regulations and critical accounting policies; counterparty risks; and any other factors set forth in the section entitled “Risk Factors” of our most recent Annual Report on Form 10-K.


All written and oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. You should not place undue reliance on forward-looking statements, which speak to our views only as of the date of this filing. Additional risks and uncertainties that we do not presently know about or that we currently consider to be insignificant may also affect our business operations and financial performance.


Please refer to "Item 1A. Risk Factors" in this Annual Report on Form 10-K for a discussion of certain risks relating to our business and any investment in our securities. Given these risks and uncertainties, you should not rely on forward-looking statements as predictions of actual results. Any or all of the forward-looking statements contained in this report, or any other public statement made by us, including by our management, may turn out to be incorrect. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.




Item 1. Business




Foot Locker, Inc., incorporated under the laws of the State of New York in 1989. Foot Locker, Inc. and its subsidiaries hereafter are referred to as the "Registrant," "Company," “we," "our," or "us." Foot Locker, Inc. has its corporate headquarters in New York.  


Foot Locker, Inc. is a leading footwear and apparel retailer that unlocks the "inner sneakerhead" in all of us. As of February 3, 2024, we operated 2,523 stores in 26 countries across North America, Europe, Australia, New Zealand, and Asia, and a licensed store presence in the Middle East and Asia. Foot Locker, Inc. has a strong history of sneaker authority that sparks discovery and ignites the power of sneaker culture through its portfolio of brands, including Foot Locker, Kids Foot Locker, Champs Sports, WSS, and atmos.


Ensuring that our customers can engage with us in the most convenient manner for them whether in our stores, on our websites, or on our mobile applications, is a high priority for us. We use our omni-channel capabilities to bridge the digital world and physical stores, including order-in-store, buy online and pickup-in-store, and buy online and ship-from-store, as well as e-commerce. We operate websites and mobile apps aligned with the brand names of our store banners. These sites offer our largest product selections and provide a seamless link between our e-commerce experience and physical stores.


The service marks, tradenames, and trademarks appearing in this report (except for Nike, Jordan, adidas, and New Balance) are owned by Foot Locker, Inc. or its subsidiaries.


Store and Operations Profile


Square Footage

January 28,

February 3,


(in thousands)









Foot Locker U.S.

  747   7

  31   723   50   2,401   4,080

Foot Locker Canada

  86   1

  2   85   6   259   426

Champs Sports

  486   1

  83   404   14   1,539   2,421

Kids Foot Locker

  394   11

  15   390   23   780   1,304


  115   28

  2   141     1,458   1,757



  1   1     3   6

North America

  1,830   48

  134   1,744   93   6,440   9,994

Foot Locker Europe (1)

  644   25

  32   637   30   1,208   2,470





  722   25

  110   637   30   1,208   2,470

Foot Locker Pacific

  94   5

  1   98   13   243   366

Foot Locker Asia


  20   13     52   98


  35   1

  5   31     28   48

Asia Pacific

  162   6

  26   142   13   323   512

Total owned stores

  2,714   79     270   2,523   136   7,971   12,976

Licensed stores

  159   56

  13   202

Grand Total

  2,873   135     283   2,725



Includes 16 and 13 Kids Foot Locker Stores as of January 28, 2023 and February 3, 2024, respectively.


2023 Form 10-K Page 1


As part of our Lace Up strategic plan, we aim to draw customers to our compelling new store concepts and build our off-mall portfolio to be the destination for all things sneakers. As of February 3, 2024, we operate 242 "Community," "House of Play," and "Power Stores" across our banners and geographies. Community stores are off-mall stores in the heart of the community that focus on creating authentic trust with local consumers and provide elevated shopping experiences with community spaces. Kids Foot Locker's House of Play concepts are rooted in play by offering a kids-first experience, including interactive playscapes, engaging activity areas, and the best styles for kids of all ages. Our Power Stores provide an elevated, seamless, and convenient shopping journey for the full family. Community, House of Play, and Power Stores provide pinnacle retail experiences that deliver connected customer interactions through service, experience, product, and a sense of community. As of February 3, 2024 and January 28, 2023, off-mall stores represented 39% and 34% of gross square footage in North America, respectively.   


The following is a brief description of each of our banners:


Foot Locker — Foot Locker, celebrating its 50th year in 2024, is a leading global brand at the "heart of sneakers." Our iconic "striper" store associates invite everyone to be part of sneaker culture by curating new, exclusive and freshly picked sneakers and apparel from leading global brands such as Nike, Jordan, adidas, and New Balance, as well as new and emerging brands in the athletic and lifestyle space. We connect emotionally with our consumers through a combination of global brand events, highly targeted and personalized experiences in local markets, and through our social and digital channels. The new Home Court store concept serves as the ultimate expression of Foot Locker’s ambitions around basketball, with 29 stores primarily in North America. Foot Locker’s 1,543 stores are located in 25 countries including 723 in the United States, Puerto Rico, U.S. Virgin Islands, and Guam, 85 in Canada, 624 in Europe, a combined 98 in Australia and New Zealand, and 13 in Asia. Our domestic stores have an average of 3,300 selling square feet and our international stores have an average of 2,100 selling square feet.


Kids Foot Locker — Kids Foot Locker offers a large selection of premium brand-name athletic footwear, apparel, and accessories for children. Kids Foot Locker enables youth of all ages to participate in sneaker culture and helps their parents shop in a curated environment with only the best assortment in stores and online. We drive a sense of community in local markets through our “House of Play” community store concept, which connects with kids, parents, and caregivers through the power of play, offering experiences and products that celebrate the wonder and fun of childhood. Of our 390 North America stores, 375 are located in the United States, and Puerto Rico, and 15 in Canada. There are an additional 13 stores in Europe. These stores have an average of 2,000 selling square feet.


Champs Sports — Champs Sports is a primarily mall-based specialty athletic footwear and apparel retailer in North America focused on serving the active athlete segment that is highly connected to sport and inspired by what is worn in the game and on the field. Champs Sports is our lead banner for apparel, driving more head-to-toe offerings for the consumer shopping for their performance and sports style. Of our 404 stores, 375 are located in the United States, Puerto Rico, and the U.S. Virgin Islands and 29 in Canada. The Champs Sports stores have an average of 3,800 selling square feet.


WSS — Acquired in 2021, WSS is an athletic-inspired retailer focused on the large and rapidly growing Hispanic consumer demographic, operating a fleet of 141 off-mall stores in key markets across California, Texas, Arizona, Florida, and Nevada. WSS’s community-driven business benefits from deep relationships with customers. WSS stores have an average of 10,300 selling square feet.


atmos — Acquired in 2021, atmos is a digitally-led, culturally-connected global brand featuring premium sneakers and apparel, an exclusive in-house label, collaborative relationships with leading vendors in the sneaker ecosystem, experiential stores, and a robust omni-channel platform. atmos operates 31 stores in Japan, with an average of 900 selling square feet. The brand is also licensed to various entities in Asia.




The athletic footwear and apparel industry is highly competitive. We compete primarily with athletic footwear specialty stores, sporting goods stores, department stores, traditional shoe stores, mass merchandisers, and online retailers, some of which are our suppliers.


2023 Form 10-K Page 2


Merchandise Purchases


Financial information concerning merchandise purchases is contained under the "Liquidity" section in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and under the "Business Risk" section in the Financial Instruments and Risk Management note in "Item 8. Consolidated Financial Statements and Supplementary Data."


Human Capital


We believe that our team members are one of our strongest competitive advantages and the high-quality service that they provide sets us apart from others in our industry. We had 14,335 full-time and 32,511 part-time employees as of February 3, 2024, and we consider employee relations to be satisfactory. Our Board of Directors, through the Human Capital and Compensation Committee, oversees human capital and management resources matters.


We believe the strength of our workforce is a significant contributor to our success as a global brand that leads with purpose. Our people strategy includes actions surrounding "Uniting our Communities of Talent" around the world to achieve focus and drive results as a more agile and dynamic organization. For example, we seek to be a great place to work by cultivating and celebrating a culture that promotes diversity, inclusion, and belonging (DIBs). By following our DIBs strategy as part of our people processes, we are able to attract, select, hire, grow, develop, promote, and retain valued team members with diverse backgrounds, perspectives, and experiences. We are relentless in creating a work environment that celebrates the differences that make us even stronger. In addition, our "Live Well. Work Well." framework enables us to provide support and resources for a variety of needs to help our team members reach their full potential. We provide career growth and professional development through formal learning and on-the-job experiences to advance our team members’ capabilities, confidence, and contributions.


Our compensation program is designed to attract, retain, and reward talented individuals who possess the skills necessary to lead and support our business objectives, achieve our strategic goals, and create long-term value for our shareholders. We offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages to eligible team members in each of our locations around the globe. Our compensation and benefits programs are designed to support the financial, mental, and physical well-being of our team members and their families. We believe in paying team members equitably, regardless of gender, race, or ethnicity, and we regularly review pay data to confirm we are doing so.


Available Information


We maintain a corporate website at www.footlocker.com/corp. Our filings with the U.S. Securities and Exchange Commission (the "SEC"), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge through this website as soon as reasonably practicable after they are filed with or furnished to the SEC. The Corporate Governance section of our corporate website contains our Corporate Governance Guidelines, Committee Charters, and the Code of Business Conduct for directors, officers, and employees, including the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer. Copies of these documents may also be obtained free of charge upon written request to our Corporate Secretary at 330 West 34th Street, New York, NY 10001.


Item 1A. Risk Factors


Risks Related to Our Business and Industry


Our inability to implement our long-range strategic plan may adversely affect our future results.


Our ability to successfully implement and execute our long-range strategic plan is dependent on many factors. Our strategies may require significant capital investment and management attention. Additionally, any new initiative is subject to certain risks, including customer acceptance of our products and renovated store designs or locations, our loyalty program, our digital e-commerce, competition, product differentiation, the ability to attract and retain qualified personnel, and our ability to successfully integrate our acquisitions and implement technological initiatives. If we cannot successfully execute our strategic growth initiatives or if the long-range plan does not adequately address the challenges or opportunities we face, our financial condition and results of operations may be adversely affected. Additionally, failure to meet shareholder expectations, particularly with respect to sales, supplier diversification, cost-cutting programs, operating margins, and earnings per share, would likely result in volatility in the market value of our stock.


2023 Form 10-K Page 3


The retail athletic footwear and apparel business is highly competitive.


Our athletic footwear and apparel operations compete primarily with athletic footwear specialty stores, sporting goods stores, department stores, traditional shoe stores, mass merchandisers, and online retailers, as well as our merchandise vendor suppliers direct-to-customers channels. Although we sell an increasing proportion of our merchandise online, a significantly faster shift in customer buying patterns to purchasing athletic footwear, athletic apparel, and sporting goods online could have a material adverse effect on our business results. In addition, all of our significant suppliers operate retail stores and distribute products directly through the internet and others may follow. Should this continue to occur or accelerate, and if our customers decide to purchase directly from our suppliers, it could have a material adverse effect on our business, financial condition, and results of operations.


The principal competitive factors in our markets are selection of merchandise, customer experience, reputation, store location, advertising, and price. We cannot assure that we will continue to be able to compete successfully against existing or future competitors. Our expansion into markets served by our competitors, and entry of new competitors or expansion of existing competitors into our markets, could have a material adverse effect on our business, financial condition, and results of operations.


A change in the relationship with any of our key suppliers or the unavailability of key products at competitive prices could affect our financial health.


Our business is dependent to a significant degree upon our ability to obtain premium products and the ability to purchase brand-name merchandise at competitive prices, from a limited number of suppliers. In addition, we have negotiated volume discounts, cooperative advertising, and markdown allowances with our suppliers, as well as the ability to cancel orders and return excess or unneeded merchandise. We cannot be certain that such terms with our suppliers will continue in the future.


We purchased 84% of our merchandise in 2023 from our top five suppliers and we expect to continue to obtain a significant percentage of our athletic product from these suppliers in future periods. Approximately 65% of all merchandise purchased in 2023 was purchased from one supplier — Nike, Inc. (“Nike”). Each of our banners is highly dependent on Nike. Merchandise that is high profile and in high demand is allocated by our suppliers based upon their own criteria. We cannot be certain that our suppliers will allocate sufficient amounts to us in the future or whether our suppliers will choose to further sell such merchandise through their own direct-to-customers channel.


Our inability to obtain merchandise in a timely manner from major suppliers as a result of business decisions by our suppliers, or any disruption in the supply chain, could have a material adverse effect on our business, financial condition, and results of operations. Because of the high proportion of purchases from Nike, any adverse development in Nike’s reputation, financial condition or results of operations, or the inability of Nike to develop and manufacture products that appeal to our target customers could also have an adverse effect on our business, financial condition, and results of operations. We cannot be certain that we will be able to acquire merchandise at competitive prices or on competitive terms in the future. These risks could have a material adverse effect on our business, financial condition, and results of operations.


The industry in which we operate is dependent upon fashion trends, customer preferences, product innovations, and other fashion-related factors.


The athletic footwear and apparel industry, especially at the premium end of the price spectrum, in which we operate, is subject to changing fashion trends and customer preferences. In addition, retailers in the athletic industry rely on their suppliers to maintain innovation in the products they develop. We cannot guarantee that our merchandise selection will accurately reflect customer preferences when it is offered for sale or that we will be able to identify and respond quickly to fashion changes, particularly given the long lead times for ordering much of our merchandise from suppliers. A substantial portion of our highest margin sales are to young males (ages 12–25), many of whom we believe purchase athletic footwear and athletic apparel as a fashion statement and are frequent purchasers. Our failure to anticipate, identify or react appropriately in a timely manner to changes in fashion trends that would make athletic footwear or athletic apparel less attractive to our customers could have a material adverse effect on our business, financial condition, and results of operations.


2023 Form 10-K Page 4


If we do not successfully manage our inventory levels, our operating results will be adversely affected.


We must maintain sufficient inventory levels to operate our business successfully. However, we also must guard against accumulating excess inventory. For example, we order most of our footwear four to six months prior to delivery to us. If we fail to anticipate accurately either the market for the merchandise or our customers’ purchasing habits, we may be forced to rely on markdowns or promotional sales to dispose of excess or slow-moving inventory, which could negatively affect our gross margins and have a material adverse effect on our business, financial condition, and results of operations.


We have key strategic initiatives designed to optimize our inventory levels and increase the efficiency and responsiveness of our supply chain. We are also developing additional capabilities to analyze customer behavior and demand, which we believe will allow us to better localize assortment and improve store-level allocations to further tailor our assortments to customer needs and increase sell-through. Further, we are leveraging technology and data science to optimize our product-to-market processes and supply chain which we anticipate will enhance our in-season responsiveness. These initiatives and additional capabilities involve significant changes to our inventory management systems and processes. If we are unable to implement these initiatives, integrate these additional capabilities successfully, or properly utilize them, we may not realize the return on our investments that we anticipate, and our results of operations could be adversely affected.


We are affected by mall traffic and our ability to secure suitable store locations, both in malls and off-malls.


Many of our stores, especially in North America where 39% of our locations are off-mall, are located primarily in enclosed regional and neighborhood malls. Our sales are affected, in part, by the volume of mall traffic. Mall traffic may be adversely affected by, among other factors, economic downturns, the closing or continued decline of anchor department stores and/or specialty stores, and a decline in the popularity of mall shopping among our target customers. One of our strategic imperatives is to further increase the penetration of our North American fleet of off-mall locations to 50%.


Further, any terrorist act, natural disaster, public health issue, including pandemics, or safety concern that decreases the level of mall traffic, or that affects our ability to open and operate stores in such locations, could have a material adverse effect on our business.


To take advantage of customer traffic and the shopping preferences of our customers, we need to maintain or acquire stores in desirable locations, such as in regional and neighborhood malls, as well as high-traffic urban retail areas and high streets. We cannot be certain that desirable locations will continue to be available at favorable rates. Some traditional enclosed malls are experiencing significantly lower levels of customer traffic, driven by economic conditions, public health issues, the closure of certain mall anchor tenants, and changes in customer shopping preferences, such as online shopping. Further, some malls have closed, and others may close in the future. While we seek to obtain suitable locations off-mall, there is no guarantee that we will be able to secure such locations.


Several large landlords dominate the ownership of prime malls and because of our dependence upon these landlords for a substantial number of our locations, any significant erosion of their financial condition or our relationships with them could negatively affect our ability to obtain and retain store locations. Additionally, further landlord consolidation may negatively affect our ability to negotiate favorable lease terms.


Our future growth may depend on our ability to expand operations in international markets, including through licensed arrangements.


Our future growth will depend, in part, on our ability to expand our business in additional international markets. As we expand into new international markets, we may have only limited experience in operating our business in such markets. In other instances, we may have to rely on the efforts and abilities of foreign business partners in such markets, such as through licensing agreements. In addition, business practices in these new international markets may be unlike those in the other markets we serve, and we may face increased exposure to certain risks. Our future growth may be materially adversely affected if we are unsuccessful in our international expansion efforts. Our inability to expand in international markets could have a material adverse effect on our business.


2023 Form 10-K Page 5


We may experience fluctuations in, and cyclicality of, our comparable-store sales results.


Our comparable-store sales have fluctuated significantly in the past, on both an annual and a quarterly basis, and we expect them to continue to fluctuate in the future. A variety of factors affect our comparable-store sales results, including, among others, fashion trends, product innovation, promotional events, the highly competitive retail sales environment, economic conditions, timing of income tax refunds, changes in our merchandise mix, calendar shifts of holiday periods, declines in foot traffic, supply chain disruptions, and weather conditions. Many of our products represent discretionary purchases. Accordingly, customer demand for these products could decline in an economic downturn or if our customers develop other priorities for their discretionary spending. These risks could have a material adverse effect on our business, financial condition, and results of operations.


The effects of natural disasters, terrorism, acts of war, acts of violence, and public health issues may adversely affect our business.


Natural disasters, including earthquakes, hurricanes, floods, and tornadoes may affect store and distribution center operations. In addition, acts of terrorism, acts of war, and military action both in the United States and abroad can have a significant effect on economic conditions and may negatively affect our ability to purchase merchandise from suppliers for sale to our customers. Any act of violence, including active shooter situations and terrorist activities, that are targeted at or threatened against shopping malls, our stores, offices or distribution centers, could result in restricted access to our stores and/or store closures in the short-term and, in the long-term, may cause our customers and employees to avoid visiting our stores. The ongoing conflicts in Ukraine and the Middle East may lead to disruption in the global supply chain, rising fuel costs, or cybersecurity risks, and economic instability generally, any of which could materially and adversely affect our business and results of operations.


Public health issues, including pandemics, whether occurring in the United States or abroad, could disrupt our operations and result in a significant part of our workforce being unable to operate or maintain our infrastructure or perform other tasks necessary to conduct our business. Additionally, public health issues may disrupt, or have an adverse effect on, our suppliers’ operations, our operations, our customers, or result in significantly lower traffic to or closure of our stores, or customer demand. Our ability to mitigate the adverse effect of these events depends, in part, upon the effectiveness of our disaster preparedness and response planning as well as business continuity planning. However, we cannot be certain that our plans will be adequate or implemented properly in the event of an actual disaster.


Any significant declines in public safety or uncertainties regarding future economic prospects that affect customer spending habits could have a material adverse effect on customer purchases of our products. We may be required to suspend operations in some or all of our locations and incur significant costs to remediate concerns which could have a material adverse effect on our business, financial condition, and results of operations.


Social unrest, including riots, vandalism, and other crimes and acts of violence, may affect the markets in which we operate, our customers, delivery of our products and customer service, and could have a material adverse effect on our business, results of operations, or financial condition.


Our business may be adversely affected by instability, disruption, or destruction, regardless of cause, including riots, civil insurrection or social unrest, and manmade disasters or crimes. Such events may result in property damage and loss and may also cause customers to suspend their decisions to shop in our stores, interrupt our supply chain, and cause restrictions, postponements, and cancellations of events that attract large crowds and public gatherings, such as store marketing events. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition, or operating results.


Risk of loss or theft of assets, including inventory shrinkage, is inherent in the retail business. Loss may be caused by error or misconduct of employees, customers, vendors or other third parties including through organized retail crime and professional theft. While some level of inventory shrinkage is unavoidable, if we were to experience higher rates of inventory shrinkage, or if we were unable to effectively reduce losses or theft of assets, our results of operations could be affected adversely.


2023 Form 10-K Page 6


Our business could be materially harmed if we fail to adequately integrate the operations of the businesses we have acquired, or may acquire.


We have recently made, and may continue to make, acquisitions in the future based on available opportunities in the market. Acquisitions involve numerous inherent challenges, such as properly evaluating acquisition opportunities, properly evaluating risks and other diligence matters, ensuring adequate capital availability, and balancing other resource constraints. There are risks and uncertainties related to acquisitions, including difficulties integrating operations, personnel, and financial and other systems; unrealized sales expectations from the acquired business; unrealized synergies and cost savings; unknown or underestimated liabilities; diversion of management attention from running our existing businesses; and potential loss of key management or customers of the acquired business.


Risks Related to Technology, Data Security, and Privacy


We are subject to technology risks, including failures, security breaches, and cybersecurity risks that could harm our business, damage our reputation, and increase our costs in an effort to protect against these risks.


Information technology is a critical part of our business operations. We depend on information systems to process transactions, analyze customer behaviors through our loyalty program, make operational decisions, manage inventory, operate our websites, purchase, sell and ship goods on a timely basis, and maintain cost-efficient operations. There is a risk that we could experience a business interruption, theft of information, or reputational damage as a result of a cyber-attack, such as an infiltration of a data center or data leakage of confidential information, either internally or through our third-party providers.


We may experience operational problems with our information systems as a result of system failures, system implementation issues, viruses, malicious hackers, sabotage, or other causes. We invest in security technology to protect the data stored by us, including our data and business processes, against the risk of data security breaches and cyber-attacks. Our data security management program includes enforcement of standard data protection policies such as Payment Card Industry compliance and other regulatory requirements. Additionally, we evaluate our major technology suppliers and any outsourced services through accepted security assessment measures. We maintain and routinely test backup systems and disaster recovery, along with external network security penetration testing by an independent third party as part of our business continuity preparedness.


While we believe that our security technology and processes follow appropriate practices in the prevention of security breaches and the mitigation of cybersecurity risks, given the ever-increasing abilities of those intent on breaching cybersecurity measures and given the necessity of our reliance on the security procedures of third-party vendors, the total security effort at any point in time may not be completely effective.


Failure of our systems, either internally or at our third-party providers, including failures due to cyber-attacks that would prevent the ability of systems to function as intended, could cause transaction errors, loss of customers and sales, and negative consequences to us, our employees, and those with whom we do business. A cyberattack on a communications network or power grid could cause operational disruption resulting in loss of revenues. Any security breach involving the misappropriation, loss, or other unauthorized disclosure of confidential information by us could also severely damage our reputation, expose us to the risks of litigation and liability, increase operating costs associated with remediation, and harm our business. While we carry insurance that would mitigate losses in connection with security breaches and cyber incidents, insurance may be insufficient to compensate us fully for potentially significant losses.


On July 26, 2023, the SEC adopted a final rule on cybersecurity risk management, strategy, governance, and incident disclosure (the "SEC Cyber Rule"). The SEC Cyber Rule requires public companies to make current disclosures about material cybersecurity incidents, as well as annual disclosures of material information about their cybersecurity risk management, strategy, and governance. The SEC Cyber Rule became effective on September 5, 2023. New data security laws add additional complexity, requirements, restrictions and potential legal risk, and compliance programs may require additional investment in resources, and could affect strategies and availability of previously useful data.


2023 Form 10-K Page 7


Risks associated with digital operations.


Our digital operations are subject to numerous risks, including risks related to the failure of the computer systems that operate our websites, mobile sites, and apps and their related support systems, computer viruses, cybersecurity risks, telecommunications or power failures, denial of service attacks, bot attacks, and similar disruptions. Also, to sustain, keep current, or grow our digital commerce business we will need to make additional investments. Risks related to digital commerce include those associated with credit card fraud, the need to keep pace with rapid technological change, governmental regulation, and legal uncertainties with respect to internet regulatory compliance. If any of these risks materialize, it could have a material adverse effect on our business.


Our inability to successfully manage the implementation of a new Enterprise Resource Planning ("ERP") system may adversely affect our business and results of operations or the effectiveness of our internal controls over financial reporting.


We are currently in the preliminary states of implementing a new ERP system, as part of a plan to integrate and upgrade our systems and processes. This initiative includes a fully-integrated global accounting, operations, and finance enterprise resource planning system. It will also include warehouse management, order management, as well as various interfaces between these systems, and supporting back-office systems. Additional implementation activities are expected to continue in phases over the next few years. ERP implementations are complex, labor intensive, and time-consuming projects, which also involve substantial expenditures on system software and implementation activities. The ERP system is critical to our ability to provide important information to our management, obtain, and deliver products, provide services and customer support, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, and otherwise operate our business. ERP implementations also require transformation of business and financial processes in order to reap the benefits of the ERP system. Any such implementation involves risks inherent in the conversion to a new computer system, including loss of information and potential disruption to our normal operations. The implementation and maintenance of the new ERP system has required, and will continue to require, the investment of significant financial and human resources, the re-engineering of processes of our business, and the attention of many employees who would otherwise be focused on other aspects of our business. Our results of operations could be adversely affected if we experience time delays or cost overruns during the ERP implementation process, or if we are unable to reap the benefits we expect from the ERP system. Any material deficiencies in the design and implementation of the new ERP system could also result in potentially materially higher costs and could adversely affect our ability to operate our business and otherwise negatively affect our financial reporting and the effectiveness of our internal control over financial reporting. Any of these consequences could have a material adverse effect on our results of operations and financial condition.


The technology enablement of omni-channel initiatives in our business is complex.


We continue to invest in initiatives designed to deliver a high-quality, coordinated shopping experience online, in stores, and on mobile devices, which requires substantial investment in technology, information systems, and employee training, as well as significant management time and resources. Our omni-channel retailing efforts include the integration and implementation of new technology, including technology and software associated with our ERP implementation, and processes to be able to fulfill orders from any point within our system of stores and distribution centers, which is extremely complex and may not meet customer expectations for timely and accurate deliveries. These efforts involve substantial risk, including risk of implementation delays, cost overruns, technology interruptions, supply and distribution delays, and other issues that can affect the successful implementation and operation of our omni-channel initiatives. If our omni-channel initiatives are not successful we may not be able to provide a relevant shopping experience, or we may not realize the return on our omni-channel investments that we anticipate, our financial performance and future growth could be materially adversely affected.


Privacy and data security concerns and regulation could result in additional costs and liabilities.


The protection of customer, employee, and Company data is critical. The regulatory environment surrounding privacy is demanding, with the frequent imposition of new and changing requirements. In addition, customers have a high expectation that we will adequately protect their personal information. Any actual or perceived misappropriation, breach or misuse involving this data could cause our customers to lose confidence in our ability to protect their data, which may cause them to potentially stop shopping with us or joining our loyalty program, attract negative media attention, cause harm to our reputation or result in liability (including but not limited to fines, penalties or lawsuits), any of which could have a material adverse effect on our business, operational results, financial position, and cash flows.


2023 Form 10-K Page 8


Regulatory scrutiny of privacy, user data protection, use of data and data collection is increasing on a global basis and regulations will likely continue to evolve over time. We are subject to numerous laws and regulations in the U.S. and internationally designed to protect the information of clients, customers, employees, and other third parties that we collect and maintain, including the European Union General Data Protection Regulation (the "EUGDPR") and the United Kingdom General Data Protection Regulation (the "UKGDPR"). Both the EUGDPR and UKGDPR, among other things, mandate requirements regarding the handling of personal data of employees and customers, including its use, protection, and the ability of persons whose data is stored to correct or delete such data about themselves. The state of California has a similar law called the California Consumer Privacy Act, recently amended and effective January 1, 2023, by the California Privacy Rights Act (as so amended, the "CCPA"). In addition to enforcement authority granted to the California Attorney General, the CCPA established the "California Privacy Protection Agency," a dedicated state agency charged with the authority to audit and enforce privacy rules, among other responsibilities, and the CCPA permits a private right of action for certain violations of law. Other U.S. states have also enacted comprehensive consumer privacy laws, and additional states may follow. We have from time to time received inquiries from governmental authorities regarding our practices. Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data.


These laws pose increasingly complex and rigorous compliance challenges, which may increase our compliance costs and related risk. If we fail to comply with these laws or other similar regulations applicable to our business, we could be subject to reputational harm and significant litigation, monetary damages, regulatory enforcement actions, or fines in one or more jurisdictions. The laws and regulations relating to privacy and data security are evolving, can be subject to significant change and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement, sanctions, and private litigation.


Risks Related to our Supply Chain and Operations


Complications in our distribution centers and other factors affecting the distribution of merchandise may affect our business.


We operate multiple distribution centers worldwide, as well as third-party arrangements, to support our operations in the United States, Canada, England, Australia, New Zealand, and Asia.


If complications arise with any facility or third-party arrangements, or if any facility is severely damaged or destroyed, our other distribution centers may be unable to support the resulting additional distribution demands. Our distribution center capabilities may also be affected by disruptions caused by upgrades or changes to our warehouse management systems. We also may be affected by disruptions in the global transportation network caused by events including delays caused by acts of war or hostility and related military actions, port disruption, port strikes, weather conditions, work stoppages, or other labor unrest. These factors may adversely affect our ability to deliver inventory on a timely basis. We depend upon third-party carriers for shipment of merchandise. Any interruption in service by these carriers for any reason could cause disruptions in our business, a loss of sales and profits, and other material adverse effects.


Manufacturer compliance with our social compliance program requirements.


We require our independent manufacturers to comply with our policies and procedures, which cover many areas including human rights policy, labor, health and safety, and environmental standards. We monitor compliance with our policies and procedures using internal resources, as well as third-party monitoring firms. Although we monitor their compliance with these policies and procedures, we do not control the manufacturers or their practices. Any failure of our independent manufacturers to comply with our policies and procedures or local laws in the country of manufacture could disrupt the shipment of merchandise to us, force us to locate alternate manufacturing sources, reduce demand for our merchandise, or damage our reputation.


Our reliance on key management.


Future performance will depend upon our ability to attract, retain, and motivate our executive and senior management teams. Our future performance depends, to a significant extent, both upon the continued services of our current executive and senior management teams, as well as our ability to attract, hire, motivate, and retain additional qualified management in the future. We have succession plans in place and our Board of Directors reviews these succession plans. If our succession plans do not adequately cover significant and unanticipated turnover, the loss of the services of any of these individuals, or any resulting negative perceptions or reactions, could damage our reputation and our business.


2023 Form 10-K Page 9


Additionally, our success depends on the talents and abilities of our workforce in all areas of our business, especially personnel that can adapt to complexities and grow their skillset across the changing environment. Our ability to successfully execute our strategy depends on attracting, developing, and retaining qualified talent with diverse sets of skills, especially functional and technology specialists that directly support our strategies.


Risks associated with attracting and retaining store and field team members.


Our success depends, in part, upon our ability to attract, develop, and retain a sufficient number of qualified store and field team members. The turnover rate in the retail industry is generally high. If we are unable to attract and retain quality team members, our ability to meet our growth goals or to sustain expected levels of profitability may be compromised.


Our ability to meet our labor needs while controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation, and overtime regulations.


Risks Related to our Investments


If our long-lived tangible assets and operating lease right-of-use assets, or goodwill become impaired, we may need to record significant non-cash impairment charges.


We review our long-lived tangible assets, operating lease right-of-use assets, and goodwill when events indicate that the carrying value of such assets may be impaired. Goodwill is reviewed for impairment if impairment indicators arise and, at a minimum, annually.


Goodwill is not amortized but is subject to an impairment test, which consists of either a qualitative assessment on a reporting unit level, or a quantitative impairment test, if necessary. The determination of impairment charges is significantly affected by estimates of future operating cash flows and estimates of fair value. Our estimates of future operating cash flows are identified from our long-range strategic plans, which are based upon our experience, knowledge, and expectations; however, these estimates can be affected by factors such as our future operating results, future store profitability, and future economic conditions, all of which are difficult to predict accurately. Any significant deterioration in macroeconomic conditions could affect the fair value of our long-lived assets, operating lease right-of-use assets, and goodwill and could result in future impairment charges, which would adversely affect our results of operations.


We do not have the ability to exert control over our minority investments, and therefore, we are dependent on others in order to realize their potential benefits.


At February 3, 2024, we hold $152 million of non-controlling minority investments in various entities and we may make additional strategic minority investments in the future. Such minority investments inherently involve a lesser degree of control over business operations, thereby potentially increasing the financial, legal, operational, and compliance risks associated with the investments. Other investors in these entities may have business goals and interests that are not aligned with ours or may exercise their rights in a manner in which we do not approve. These circumstances could lead to delayed decisions or disputes and litigation with those other investors, all of which could have a material adverse impact on our reputation, business, financial condition, and results of operations.


If our investees seek additional financing to fund their growth strategies, these financing transactions may result in further dilution of our ownership stakes and these transactions may occur at lower valuations than the investment transactions through which we acquired such interests, which could significantly decrease the fair values of our investments in those entities. Additionally, if our investees are unable to obtain additional financing, those entities could need to significantly reduce their spending in order to fund their operations or result in their insolvency. These actions likely would result in reduced growth forecasts, which also could significantly decrease the fair values of our investments in those entities.


Risks Related to Shareholder Activism, Geopolitics, Regulations, Internal Controls, and Other External Risks


We may face risks associated with shareholder activism.


Publicly-traded companies are subject to campaigns by shareholders advocating corporate actions related to matters, such as corporate governance, operational practices, and strategic direction. We may become subject in the future to such shareholder activity and demands. Such activities could interfere with our ability to execute our business plans, affect our allocation of capital, disrupt relationships with our vendor partners, be costly and time-consuming, disrupt our operations, and divert the attention of management, any of which could have an adverse effect on our business or stock price.


2023 Form 10-K Page 10


Economic or political conditions in other countries, including fluctuations in foreign currency exchange rates and tax rates may adversely affect our operations.


A significant portion of our sales and operating income for 2023 was attributable to our operations outside of the United States. As a result, our business is subject to the risks associated with doing business outside of the United States such as local customer product preferences, political unrest, disruptions or delays in shipments, changes in economic conditions in countries in which we operate, foreign currency fluctuations, real estate costs, and labor and employment practices in non-U.S. jurisdictions that may differ significantly from those that prevail in the United States.


In addition, because our suppliers manufacture a substantial amount of our products in foreign countries, our ability to obtain sufficient quantities of merchandise on favorable terms may be affected by governmental regulations, trade restrictions, labor, and other conditions in the countries from which our suppliers obtain their product.


Fluctuations in the value of the euro and the British Pound may affect the value of our European earnings when translated into U.S. dollars. Similarly, our earnings in other jurisdictions may be affected by the value of currencies when translated into U.S. dollars. Our international subsidiaries conduct most of their business in their local currency. 


Our products are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions. Fluctuations in tax rates and duties and changes in tax legislation or regulation could have a material adverse effect on our results of operations and financial condition.


Our stock price may be volatile, and the value of our common stock has declined and may continue to decline.


The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including without limitation:



a change in the relationship with any of our key suppliers or the unavailability of key products at competitive prices;

  actual or anticipated fluctuations in our financial condition or results of operations;
  variance in our financial performance from expectations of securities analysts and securities analysts may issue unfavorable research about us;

changes in our projected operating and financial results;


announcements by us or our competitors of significant business developments, acquisitions, or new offerings;


significant data breaches;


material litigation;


future sales of our common stock by us or our shareholders, or the perception that such sales may occur;


changes in senior management or key personnel;


the trading volume of our common stock;


changes in the anticipated future size and growth rate of our market; and


general macroeconomic, geopolitical, and market conditions beyond our control.


Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, such as recessions, interest rate changes, or international currency fluctuations, may also negatively affect the market price of our common stock. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s attention.


Increasing inflation could adversely affect our business, financial condition, results of operations, or cash flows.


Inflation, as well as some of the measures taken by or that may be taken by the governments in countries where we operate in an attempt to curb inflation, may have negative effects on the economies of those countries generally. If the United States or other countries where we operate experience substantial inflation in the future, our business may be adversely affected. Fewer customers may shop as these purchases may be seen as discretionary, and those who do shop may limit the amount of their purchases. Any reduced demand or changes in customer purchasing behavior may lead to lower sales, higher markdowns and an overly promotional environment or increased marketing and promotional spending. This could have a material adverse effect on our business, financial condition, results of operations, or cash flows.


2023 Form 10-K Page 11


Macroeconomic developments may adversely affect our business.


Our performance is subject to global economic conditions and the related effects on consumer spending levels. Continued uncertainty about global economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, unemployment, negative financial news, and/or declines in income or asset values, which could have a material negative effect on demand for our products. The ongoing conflicts in Ukraine and the Middle East may lead to disruption in the global supply chain, rising fuel costs, or cybersecurity risks, and economic instability generally, any of which could materially and adversely affect our business and results of operations. Additionally, with the U.K.’s exit from the European Union in January 2020, known as Brexit, the ongoing uncertainties of the trading relationship between the U.K. and the European Union have yet to be completely realized and the ultimate outcome and long-term impacts for the U.K. and Europe remain uncertain. Ongoing changes and uncertainties related to Brexit, including trade frictions and Britain’s high inflation rate, continue to subject us to heightened trade risks in that region. In addition, disruptions to trade and free movement of goods, services, and people to and from the U.K., disruptions to the workforce of our business partners, increased foreign exchange volatility with respect to the British pound, and additional legal, political, and economic changes also subject us to further uncertainty in the region.


As a retailer that is dependent upon consumer discretionary spending, our results of operations are sensitive to changes in macroeconomic conditions. Our customers may have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies, increased fuel and energy costs, higher interest rates, higher taxes, reduced access to credit, and lower home values. These and other economic factors could adversely affect demand for our products, which could adversely affect our financial condition and operating results.


Imposition of tariffs and export controls on the products we buy may have a material adverse effect on our business.


A significant portion of the products that we purchase, including the portion purchased from U.S.-based suppliers, as well as most of our private brand merchandise, is manufactured abroad. We may be affected by potential changes in international trade agreements or tariffs, such as new tariffs imposed on certain goods imported into the U.S. Furthermore, China or other countries may institute retaliatory trade measures in response to existing or future tariffs imposed by the U.S. that could have a negative effect on our business. If any of these events occur as described, we may be obligated to seek alternative suppliers for our private brand merchandise, raise prices, or make changes to our operations, any of which could have a material adverse effect on our sales and profitability, results of operations, and financial condition.


Instability in the financial markets may adversely affect our business.


The global macroeconomic environment could be negatively affected by, among other things, instability in global economic markets, disruptions to the banking system and financial market volatility resulting from bank failures, increased U.S. trade tariffs and trade disputes with other countries, instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of Brexit, the Russian invasion of the Ukraine, the conflict in the Middle East, and other political tensions, and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies and in global financial markets.


This volatility may affect our future access to the credit and debt security markets, leading to higher borrowing costs, or, in some cases, the inability to obtain additional financing. Although we currently have a revolving credit agreement in place until July 14, 2025, tightening of credit markets could make it more difficult for us to access funds, refinance our existing indebtedness, enter into agreements for new indebtedness, or obtain funding through the issuance of the Company’s securities.


Material changes in the market value of the securities we hold may adversely affect our results of operations and financial condition.


At February 3, 2024, our cash and cash equivalents totaled $297 million. The majority of our investments were short-term deposits in highly-rated banking institutions. We regularly monitor our counterparty credit risk and mitigate our exposure by making short-term investments only in highly-rated institutions and by limiting the amount we invest in any one institution. We continually monitor the creditworthiness of our counterparties. At February 3, 2024, all investments were in investment grade institutions. Despite an investment grade rating, it is possible that the value or liquidity of our investments may decline due to any number of factors, including general market conditions and bank-specific credit issues.


2023 Form 10-K Page 12


Our U.S. pension plan trust holds assets totaling $359 million at February 3, 2024. The fair values of these assets held in the trust are compared to the plan’s projected benefit obligation to determine the pension funding liability. We attempt to mitigate funding risk through asset diversification, and we regularly monitor investment risk of our portfolio through quarterly investment portfolio reviews and periodic asset and liability studies. Despite these measures, it is possible that the value of our portfolio may decline in the future due to any number of factors, including general market conditions and credit issues. Such declines could affect the funded status of our pension plan and future funding requirements.


Our financial results may be adversely affected by tax rates or exposure to additional tax liabilities.


We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Our provision for income taxes is based on a jurisdictional mix of earnings, statutory rates, and enacted tax rules, including transfer pricing. Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis. Our effective tax rate could be adversely affected by a number of factors, including shifts in the mix of pretax results by tax jurisdiction, changes in tax laws or related interpretations in the jurisdictions in which we operate, and tax assessments and related interest and penalties resulting from income tax audits. Further, many countries continue to consider changes in their tax laws by implementing new taxes such as the digital service tax and initiatives such as the Organization for Economic Co-operation and Development’s Pillar II global minimum tax. Various countries are in the process of incorporating the Pillar II framework within their tax laws.


Changes in employment laws or regulation could harm our performance.


Various foreign and domestic labor laws govern our relationship with our employees and affect our operating costs. These laws include, but are not limited to, minimum wage requirements, overtime, sick, and premium pay, paid time off, work scheduling, healthcare reform and the Patient Protection and Affordable Care Act, and the Protecting the Right to Organize Act, unemployment tax rates, workers’ compensation rates, European works council requirements, and union organization.


A number of factors could adversely affect our operating results, including additional government-imposed increases in minimum wages, overtime, sick, and premium pay, paid leaves of absence, mandated health benefits, and changing regulations from the National Labor Relations Board or other agencies. Complying with any new legislation or interpretation of law, or reversing changes implemented under existing law could be time-intensive and expensive and may affect our business.


Legislative or regulatory initiatives related to climate change concerns may negatively affect our business.


Greenhouse gases may have an adverse effect on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. Global climate change could result in certain types of natural disasters occurring more frequently or with more intense effects. Such events could make it difficult or impossible for us to deliver products to our customers, create delays, and inefficiencies in our supply chain. Following an interruption to our business, we could require substantial recovery time, experience significant expenditures to resume operations, and lose significant sales. Concern over climate change may result in new or additional legal, legislative, regulatory, and compliance requirements to reduce or mitigate the effects of climate change on the environment, which could result in future tax, transportation, and utility increases, which could adversely affect our business.


There is also increased focus, including by investors, customers, and other stakeholders, on these and other sustainability matters, such as worker safety, the use of plastic, energy consumption, and waste.


We face increased scrutiny and evolving expectations regarding environmental, social, and governance ("ESG") matters.


There is increasing scrutiny and evolving expectations from investors, customers, regulators, and other stakeholders on ESG practices and disclosures, including those related to environmental stewardship, climate change, and diversity, inclusion, and belonging. Legislators and regulators have imposed, and likely will continue to impose, ESG-related legislation, rules, and guidance, which may conflict with one another and impose additional costs on us, impede our business opportunities, or expose us to new or additional risks.


For example, developing and acting on ESG-related initiatives, including sourcing and operational decisions, collecting, measuring, and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC's recently approved climate-related reporting requirements and sustainability reporting requirements in the European Union.


2023 Form 10-K Page 13


In addition, state attorneys general and other state officials have spoken out against ESG-motivated investing by some investment managers and terminated contracts with managers based on their following certain ESG-motivated strategies. Moreover, proxy advisory firms that provide voting recommendations to investors have developed ratings for evaluating companies on their approach to different ESG matters, and unfavorable ratings of our company or our industry may lead to negative investor sentiment and the diversion of investment to other companies or industries. If we are unable to meet these standards or expectations, whether established by us or third parties, it could result in adverse publicity, reputational harm, or loss of customer and/or investor confidence, which could adversely affect our business, results of operations, financial condition, and liquidity.


We may be adversely affected by regulatory and litigation developments.


We are exposed to the risk that federal or state legislation may negatively affect our operations. Changes in federal or state wage requirements, employee rights, health care, social welfare, or entitlement programs, including health insurance, paid leave programs, or other changes in workplace regulation could increase our cost of doing business or otherwise adversely affect our operations. Additionally, we are regularly involved in litigation and demands, including commercial, tort, intellectual property, customer, employment, wage and hour, data privacy, anti-corruption, and other claims, including purported class action lawsuits. The cost of defending against these types of claims against us or the ultimate resolution of such claims, whether by settlement, mediation, arbitration, or adverse court or agency decision, may harm our business.


We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws.


The U.S. Foreign Corrupt Practices Act ("FCPA") and similar worldwide anti-corruption laws, including the U.K. Bribery Act of 2010, which is broader in scope than the FCPA, generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. Despite our training and compliance programs, we cannot be assured that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees or agents. Our continued expansion outside the United States, including in developing countries, could increase the risk of FCPA violations in the future. Violations of these laws, or allegations of such violations, could have a material adverse effect on our results of operations or financial condition.


Failure to fully comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, market confidence in our reported financial information, and the price of our common stock.


We continue to document, test, and monitor our internal control over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. However, we cannot be assured that our disclosure controls and procedures and our internal control over financial reporting will prove to be completely adequate in the future. Failure to comply with Section 404 of the Sarbanes-Oxley Act of 2002 could negatively affect our business, the price of our common stock and market confidence in our reported financial information.


International intellectual property protection can be uncertain and costly.


Uncertainty in intellectual property protection can result from conducting business outside the United States, particularly in jurisdictions that do not have comparable levels of protection for our assets such as intellectual property, copyrights, and trademarks. Continuing to operate in such foreign jurisdictions where the ability to enforce intellectual property rights is limited increases our exposure to risk.


Risks Related to our Indebtedness and our Credit Facility


Our debt may cause an adverse effect on our business.


We have $400 million of 4% Senior Notes due 2029. Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our debt obligations could adversely affect our business, financial condition, results of operations, and other corporate requirements. This could require us to direct a substantial portion of our future cash flow toward payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures, and other corporate requirements, thereby limiting our ability to respond to business opportunities.


2023 Form 10-K Page 14


We may be unable to draw on our credit facility in the future or we may be unable to secure a new credit facility with similar terms. 


We have a $600 million asset-based revolving credit facility that is scheduled to expire in July 2025. Borrowings and letters of credit under our credit facility are not permitted to exceed a borrowing base, which is tied to our level of inventory. Therefore, reductions in the value of our inventory would result in a reduction in our borrowing base, which would reduce the amount of financial resources available to meet our operating requirements. Also, if we do not comply with our financial covenants and we do not obtain a waiver or amendment from our lenders, the lenders may elect to cause any amounts then owed to become immediately due and payable, not fund any new borrowing, or they may decline to renew our credit facility. In that event, we would seek to establish a replacement credit facility with one or more other lenders, including lenders with which we have an existing relationship, potentially on less desirable terms. There can be no guarantee that replacement financing would be available at commercially reasonable terms, if at all. Additionally, our rates on our revolving credit facility may be affected by our credit ratings which could result in higher interest expense in the future.


Item 1B. Unresolved Staff Comments



Item 1C. Cybersecurity


Cybersecurity risk management and strategy


Information security is an important part of the Company’s culture and foundational to its management. This philosophy is emphasized throughout the organization by the Board of Directors, senior leadership, and team members to help promote a Company-wide culture of cybersecurity risk management. 


We use information technology and third-party service providers to support our global business processes and activities, which exposes us to cybersecurity risks. We have from time-to-time experienced cybersecurity incidents. In the event of a cybersecurity incident, we respond in accordance with our policies, processes, applicable laws, and regulations. When necessary, we also engage third parties, such as cybersecurity advisors, to assist in investigating and remediating incidents. To date, the cybersecurity incidents have not had a material effect on our business strategy, results of operations, or financial condition.


Key Program Components


We take cybersecurity seriously, and our cybersecurity program is aligned to well-known and established cybersecurity frameworks. We use, and continue to improve, our cyber defense-in-depth strategy, which uses multiple layers of security for holistic protection.


Our cybersecurity governance program is strategically integrated into our enterprise risk management and is periodically presented to the audit committee, which is responsible for oversight of the enterprise risk management framework associated with technology, security, data, and privacy, and the Board of Directors. These procedures include regular risk monitoring by management to update current risks and identify potential new and emerging risks. The Technology Committee receives regular briefings from our Chief Operations Officer, Chief Technology Officer, Chief Information Security Officer, and outside experts on cybersecurity risks and cyber risk oversight. During these meetings, the Technology Committee and management discuss these risks, risk management activities and efforts, best practices, lessons learned from incidents at other companies, the effectiveness of our security measures, and other related matters. The Technology Committee Chair reports on the committee’s meetings, considerations, and actions to the Board at the next Board meeting following each Technology Committee meeting. The Audit Committee also discusses and receives updates on cybersecurity matters in connection with its oversight of enterprise risk management.


We also maintain a variety of incident response plans that are utilized when incidents are detected. We conduct periodic tabletop exercises, in which different internal and external stakeholders, including from time to time our CEO, Non-Executive Chair, or Board of Directors, participate in a simulated cyber scenario. The purpose of these exercises is to test our cyber incident response plan, identify weaknesses or gaps, and ensure that all participants are aware of, and familiar with, their roles and responsibilities.


We require employees with access to information systems to undertake data protection and cybersecurity training. In addition, certain individuals with privileged access, such as system administrators and developers, are subject to additional controls and monitoring activities. We also conduct periodic phishing campaigns to train users to better identify, report, and avoid malicious content.


2023 Form 10-K Page 15


We recognize that third-party service providers may introduce cybersecurity risks to our organization. In an effort to mitigate these risks, we have implemented a process before engaging with third-party service providers which are designed to assess their cybersecurity practices. Additionally, we endeavor to include cybersecurity requirements in our contracts with these providers, requiring them to adhere to certain cybersecurity standards and protocols.


Our Chief Information Security Officer, with oversight from the Chief Technology Officer and Chief Operations Officer, is primarily responsible for assessing and managing cybersecurity risks. Our Chief Information Security Officer has extensive cybersecurity knowledge and skills gained from over 25 years’ experience in the field. Our Chief Information Security Officer is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents.


Several experienced information security professionals report to our Chief Information Security Officer and he is supported by a team of trained cybersecurity team members. In addition to our extensive in-house cybersecurity capabilities, at times we also engage assessors, consultants, auditors, or other third parties to assist with assessing, identifying, and managing cybersecurity risks.


Notwithstanding the breadth of the Company’s information security program, it may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse impact. For a discussion of whether and how any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition, see Item 1A. "Risk Factors," which is incorporated by reference into this Item 1C.


Item 2. Properties


Our properties consist of land, leased stores, administrative facilities, and distribution centers. Gross square footage and total selling area for our store locations at the end of 2023 were approximately 12.98 and 7.97 million square feet, respectively. These properties, which are primarily leased, are located in the United States and its territories, Canada, various European countries, Asia, Australia, and New Zealand.


As of February 3, 2024, we operated eight distribution centers, of which two are owned and six are leased, occupying an aggregate of 3.42 million square feet. Six of these distribution centers are in the United States, one in Canada, and one in the Netherlands. During 2023, we closed the distribution center that supported the Eastbay business and opened a new leased distribution center to support our Northeast operations. Additionally, we utilize the services of third-party providers for our operations in the U.K., Australia, New Zealand, South Korea, and Japan. We also operate a leased warehouse in the United States, which supports our Team Edition apparel business.


The Company plans to move two of its distribution centers to new leased locations to enhance capabilities and support planned growth for our WSS and European businesses. Our WSS distribution center is expected to open mid-year 2024, with our European distribution center expected to open in 2025. These new distribution centers will employ state-of-the-art technologies to deliver improved logistics capabilities and operational efficiencies.


We believe that all leases of properties that are material to our operations may be renewed, or that alternative properties are available, on terms similar to existing leases.


Item 3. Legal Proceedings


Information regarding the Company’s legal proceedings is contained in the "Legal Proceedings" note under "Item 8. Consolidated Financial Statements and Supplementary Data."


Item 4. Mine Safety Disclosures


Not applicable.


2023 Form 10-K Page 16


Item 4A. Information about our Executive Officers


The following table provides information with respect to all persons serving as executive officers as of March 28, 2024, including business experience for the last five years.





Executive Officer Since

Mary N. Dillon Chief Executive Officer since September 2022. Previously, Ms. Dillon served as Chief Executive Officer of Ulta Beauty, Inc. from July 2013 through June 2021. 62 2022
Michael Baughn Executive Vice President and Chief Financial Officer since June 2023. Previously, Mr. Baughn served in various roles at Kohl’s Corporation, including Executive Vice President of Finance and Treasurer from July 2021 through May 2023 and Senior Vice President of Finance and Treasurer from April 2018 through July 2021.



Franklin R. Bracken Executive Vice President and Chief Commercial Officer since December 2022. Previously, he served as Executive Vice President and Chief Operating Officer from November 2021 through December 2022, Executive Vice President and Chief Executive Officer — North America from July 2020 through November 2021, and Senior Vice President and General Manager Foot Locker U.S., Lady Foot Locker, and Kids Foot Locker from October 2017 through July 2020. 51 2021
Cynthia Carlisle Executive Vice President and Chief Human Resource Officer since March 2024. Previously, she served in various roles at Stryker Corporation, including Group Vice President, Human Resources from July 2020 through February 2024 and Vice President, Talent Management from November 2019 through July 2020. She served as Vice President, Human Resources for Roche Diagnostics from September 2016 through October 2019. 49


Jennifer L. Kraft

Executive Vice President and General Counsel since July 2023. Previously, she served as Senior Vice President, Deputy General Counsel and Corporate Secretary for Starbucks Corporation from September 2020 through June 2023. Prior to Starbucks, she served in roles of increasing responsibility at United Airlines Holdings, Inc. from July 2011 through September 2020, most recently as Deputy General Counsel, Vice President and Corporate Secretary.



Elliott D. Rodgers

Executive Vice President and Chief Operations Officer since December 2022. Previously, Mr. Rodgers served as Chief People Officer for Project 44 from October 2021 through November 2022. He served in various roles at Ulta Beauty, Inc., including Chief Information Officer from September 2020 through October 2021, Chief Supply Chain Officer from April 2019 to September 2020, and Senior Vice President, Supply Chain from March 2017 through March 2019.



Giovanna Cipriano Senior Vice President and Chief Accounting Officer since May 2009.




There are no family relationships among the executive officers or directors of the Company.




Item 5. Market for the Companys Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities


Foot Locker, Inc. common stock (ticker symbol "FL") is listed on the New York Stock Exchange as well as on the Börse Stuttgart stock exchange in Germany. As of February 3, 2024, we had 8,741 shareholders of record owning 94,283,984 common shares.


We declared dividends of $0.40 per share in the first, second, and third quarters of 2023. The declaration of dividends and the establishment of the per share amount, record dates and payment dates for any such future dividends are subject to the final determination of our Board of Directors, and are dependent upon multiple factors, including future earnings, cash flows, financial requirements, and other considerations. As previously announced, the Company has paused dividends to increase balance sheet flexibility in support of longer-term strategic initiatives.


2023 Form 10-K Page 17


The following table is a summary of our fourth quarter share repurchases:


Date Purchased

  Total Number of Shares Purchased (1)     Average Price Paid Per Share (1)    

Total Number of Shares Purchased as Part of Publicly Announced Program (2)


Dollar Value of Shares that may yet be Purchased Under the Program (2)


October 29 to November 25, 2023

        $           $ 1,103,814,042  

November 26 to December 30, 2023

    1,606       29.53             1,103,814,042  

December 31, 2023 to February 3, 2024

    2,080       28.97             1,103,814,042  

    3,686     $ 29.21                



These columns reflect shares acquired in satisfaction of the tax withholding obligation of holders of restricted stock awards, which vested during the quarter. 


On February 24, 2022, the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $1.2 billion of its common stock, this program does not have an expiration date.


Performance Graph


The graph below compares the cumulative five-year total return to shareholders (common stock price appreciation plus dividends, on a reinvested basis) of our common stock relative to the total returns of the S&P 600 Specialty Retailing Index and the Russell 3000 Index.

















Foot Locker, Inc.

  $ 100.00     $ 71.28     $ 84.38     $ 87.29     $ 91.03     $ 63.86  

S&P 600 Specialty Retailing Index

  $ 100.00     $ 103.07     $ 251.03     $ 218.01     $ 213.28     $ 235.64  

Russell 3000 Index

  $ 100.00     $ 120.31     $ 144.94     $ 168.53     $ 157.53     $ 192.27  


We previously used the S&P 400 Specialty Retailing Index and the Russell Midcap Index, however, due to the reduction in size of our market capitalization it was determined that the S&P 600 Specialty Retailing Index and the Russell 3000 Index are more appropriate benchmarks as the median market capitalizations are the closest to the Company’s.


2023 Form 10-K Page 18


The following graph compares the cumulative five-year total return to shareholders on our common stock relative to the total returns of the S&P 400 Specialty Retailing Index and Russell Midcap Index, our prior benchmarks. It is our intention to use the Russell 3000 Index and the S&P 600 Specialty Retailing Index for future performance graphs.

















Foot Locker, Inc.

  $ 100.00     $ 71.28     $ 84.38     $ 87.29     $ 91.03     $ 63.86  

S&P 400 Specialty Retailing Index

  $ 100.00     $ 101.35     $ 150.57     $ 162.13     $ 155.60     $ 174.28  

Russell Midcap Index

  $ 100.00     $ 116.37     $ 137.00     $ 152.05     $ 149.72     $ 163.09  


The above information should not be deemed "soliciting material" or to be filed with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.


2023 Form 10-K Page 19


Item 6. Selected Financial Data




The selected financial data below should be read in conjunction with the Consolidated Financial Statements and the Notes thereto and other information contained elsewhere in this report.


($ in millions, except per share amounts)

2023 (1)









Summary of Operations:



$ 8,154     8,747     8,958     7,548     8,005

Licensing revenue

  14     12     10     6     8

Gross margin

  2,259     2,792     3,080     2,183     2,543

Selling, general and administrative expenses

  1,852     1,903     1,851     1,587     1,650

Depreciation and amortization

  199     208     197     176     179

Impairment and other

  80     112     172     117     65

Interest (expense) income, net

  (9 )   (15 )   (14 )   (7 )   11

Other (expense) income, net

  (556 )   (42 )   384     192     4

Net (loss) income attributable to Foot Locker, Inc.

  (330 )   342     893     323     491

Per Common Share Data:





Basic earnings

$ (3.51 )   3.62     8.72     3.10     4.52

Diluted earnings

$ (3.51 )   3.58     8.61     3.08     4.50

Common stock dividends declared per share

$ 1.20     1.60     1.00     0.70     1.52

Weighted-average Common Shares Outstanding:





Basic earnings

  94.2     94.3     102.5     104.3     108.7

Diluted earnings

  94.2     95.5     103.8     105.1     109.1

Financial Condition:


Cash and cash equivalents

$ 297     536     804     1,680     907

Merchandise inventories

  1,509     1,643     1,266     923     1,208

Property and equipment, net

  930     920     917     788     824

Total assets

  6,868     7,907     8,135     7,043     6,589

Long-term debt and obligations under capital leases

  447     452     457     110     122

Total shareholders’ equity

  2,890     3,293     3,243     2,776     2,473

Financial Ratios:


Sales per average gross square foot (2)

$ 510     548     540     417     510

SG&A as a percentage of sales

  22.7 %   21.8     20.7     21.0     20.6

Net (loss) income margin

  (4.0 )%   3.9     10.0     4.3     6.1

Adjusted net income margin (3)

  1.6 %   5.4     8.4     3.9     6.7

Earnings (loss) before interest and taxes (EBIT) (3)

$ (414 )   539     1,254     501     661

EBIT margin (3)

  (5.1 )%   6.2     14.0     6.6     8.3

Adjusted EBIT (3)

$ 214     692     1,049     428     722

Adjusted EBIT margin (3)

  2.6 %   7.9     11.7     5.7     9.0

Return on assets (ROA)

  (4.5 )%   4.3     11.8     4.7     9.4

Return on invested capital (ROIC) (3)

  3.8 %   9.2     16.4     8.6     12.5

Current ratio

  1.7     1.6     1.4     1.7     2.0

Other Data:


Capital expenditures

$ 242     285     209     159     187

Number of stores at year end

  2,523     2,714     2,858     2,998     3,129

Total selling square footage at year end (in millions)

  7.97     7.92     7.91     7.50     7.57

Total gross square footage at year end (in millions)

  12.98     13.15     13.28     12.98     13.15



Results for fiscal year 2023 reflect 53 weeks of operations as compared to 52 weeks for all other years presented.


Calculated as store sales divided by the average monthly ending gross square footage of the last thirteen months. The computation for each of the years presented reflects the foreign exchange rate in effect for such year.

(3) These represent non-GAAP measures, see Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for additional information and calculation.


2023 Form 10-K Page 20


Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations


This section of the Annual Report on Form 10-K generally discusses 2023 and 2022 detail and year-over-year comparisons between these years. For a comparison of our results for 2022 to our results of 2021 and other financial information related to 2021, refer to our Annual Report on Form 10-K for the year ended January 28, 2023 filed with the SEC on March 27, 2023.


Our Business


Foot Locker, Inc. is a leading specialty retailer operating 2,523 stores in 26 countries across the North America, Europe, Australia, New Zealand, and Asia. We also have licensed store presence in the Middle East and Asia, with other geographies expected in 2024. Results for fiscal year 2023 reflect 53 weeks of operations as compared to 52 weeks for all other years presented.


Foot Locker, Inc. has a strong history of sneaker authority that sparks discovery and ignites the power of sneaker culture through its portfolio of brands, including Foot Locker, Kids Foot Locker, Champs Sports, WSS, and atmos.


Overview of Consolidated Results


(in millions, except per share data)








$ 8,154   $ 8,747   $ 8,958  

Sales per average square foot

  510     548     540  

Licensing revenue

  14     12     10  

Gross margin

  2,259     2,792     3,080  

Gross margin rate

  27.7 %   31.9 %   34.4 %

Selling, general and administrative expenses ("SG&A")

  1,852     1,903     1,851  

SG&A, as a percentage of sales

  22.7 %   21.8 %   20.7 %

Income from operations

$ 142   $ 581   $ 870  

(Loss) income from continuing operations before income taxes

$ (423 ) $ 524   $ 1,240  

Net (loss) income attributable to Foot Locker, Inc.

$ (330 ) $ 342   $ 893  

Diluted earnings per share

$ (3.51 ) $ 3.58   $ 8.61  




Adjusted net income (non-GAAP)

$ 134   $ 473   $ 755  

Adjusted diluted earnings per share (non-GAAP)

$ 1.42   $ 4.95   $ 7.27  


Summary of our 2023 financial performance:









Sales (decrease) increase

    (6.8 )%     (2.4 )%     18.7 %

Comparable-store sales (decrease) increase

    (6.7 )%     (1.9 )%     15.4 %


  Sales per square foot decreased to $510, from $548 per square foot in 2022, consistent with the overall sales decline of 6.8%. Excluding the effect of foreign currency fluctuations, sales decreased by 7.0% as compared to the prior-year period.
  Our footwear sales represented 81% of total sales, while apparel and accessory sales were 19%, reflecting a 1% increase in footwear sales compared to the prior year.

One of our strategic initiatives is improving our omni-channel capabilities. We are making ongoing investments in our omni-channel ecosystem, including our e-commerce experience and supply chain capabilities, in order to create seamless shopping experiences across all of our sales channels. During the year, we saw improvements in our e-commerce capabilities and the percentage of our direct-to-customers sales channel increased to 17.6% of total sales in 2023 as compared with 16.3% last year, excluding the sales from our Eastbay business that we closed in late 2022. 


Gross margin, as a percentage of sales, decreased to 27.7% as a result of increased promotions during 2023 and occupancy rate deleverage from the decline in sales.  We prudently managed our markdowns to ensure that we ended the year with an improved inventory position.


Our cost optimization program provided benefits, however it was not enough to offset the decline in sales and our strategic investments in technology and wages for our store team members. SG&A expenses were 22.7% of sales, an increase of 90 basis points as compared with the prior year. 


2023 Form 10-K Page 21



We continued to rationalize our portfolio of store brands and geographies to focus on our core banners. During 2023 we made significant progress, we completed the wind down of the Sidestep and atmos U.S. businesses, and we transitioned our businesses in Singapore and Malaysia to a license model.  Additionally, we reduced our business in Asia by closing our operations in Hong Kong and Macau.


During the year, we incurred costs to streamline our operations in Asia as well other non-cash charges related to our minority investments and our pension plan. See the "Other (Expense) Income," net section for further information. 

  In 2023, we closed 270 stores, of which 83 related to our Champs Sports banner as we continued to shift this banner to focus serving the active athlete. Additional closures are anticipated in early 2024 to finalize the repositioning of this banner.  Our closures were focused on stores that were underperforming and reflected the actions taken to rationalize our portfolio.

Our focus for 2023 was an intentional investment and repositioning period and that is reflected in our results. Adjusted net income was $134 million, or $1.42 diluted earnings per share, as compared with adjusted net income of $473 million, or $4.95 diluted earnings per share, in the prior year. See the "Reconciliation of Non-GAAP Measures" section for detailed explanations of the various adjustments to our adjusted results.


Highlights of our financial position for the year ended February 3, 2024 include:



We ended the year with cash and cash equivalents of $297 million at February 3, 2024.


We reduced our merchandise inventories to $1.5 billion, or by 8.2%, as we focused on improving our inventory position.


Net cash provided by operating activities was $91 million as compared with $173 million last year. This reflected lower net income, partially offset by a decrease in inventory.


Cash capital expenditures during 2023 totaled $242 million and were primarily directed to the remodeling or relocation of 136 stores and the build-out of 79 new stores, as well as various technology and infrastructure projects. The new stores were focused on expanding our "Community," "House of Play," and "Power" stores, and we opened 69 stores bringing the total to 242 new concept stores operating as of the end of the fiscal year. Our capital plans for 2024 will continue to focus on the modernization of the store portfolio. 


During 2023, we returned $113 million of cash to our shareholders through dividends. As previously announced, the Company has paused dividends to increase balance sheet flexibility in support of longer-term strategic initiatives.  We have embarked on a significant project to upgrade and update all of our enterprise planning systems, including e-commerce, supply chain, and financial systems.  


Reconciliation of Non-GAAP Measures


In addition to reporting our financial results in accordance with generally accepted accounting principles ("GAAP"), we report certain financial results that differ from what is reported under GAAP. In the following tables, we have presented certain financial measures and ratios identified as non-GAAP such as Earnings (Loss) Before Interest and Taxes ("EBIT"), adjusted EBIT, adjusted EBIT margin, adjusted income before income taxes, adjusted net income, adjusted net income margin, adjusted diluted earnings per share, Return on Invested Capital ("ROIC"), and free cash flow.


We present these non-GAAP measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by excluding items that are not indicative of our core business or which affect comparability. These non-GAAP measures are also useful in assessing our progress in achieving our long-term financial objectives.


Additionally, we present certain amounts as excluding the effects of foreign currency fluctuations, which are also considered non-GAAP measures. Throughout the following discussions, where amounts are expressed as excluding the effects of foreign currency fluctuations, such changes are determined by translating all amounts in both years using the prior-year average foreign exchange rates. Presenting amounts on a constant currency basis is useful to investors because it enables them to better understand the changes in our businesses that are not related to currency movements.


We estimate the tax effect of the non-GAAP adjustments by applying a marginal rate to each of the respective items. The income tax items represent the discrete amount that affected the period.


The non-GAAP financial information is provided in addition to, and not as an alternative to, our reported results prepared in accordance with GAAP. Presented below is a reconciliation of GAAP and non-GAAP results discussed throughout this Annual Report on Form 10-K. All adjusted amounts exclude the loss from discontinued operations. Please see the non-GAAP reconciliations for free cash flow in the "Liquidity and Capital Resources" section.


2023 Form 10-K Page 22


Reconciliation of Non-GAAP Measures


($ in millions)








Pre-tax (loss) income:


(Loss) income from continuing operations before income taxes

  $ (423 )   $ 524     $ 1,240  

Pre-tax adjustments excluded from GAAP:


Impairment and other (1)

    80       112       172  

Other expense / income, net (2)

    548       41       (377 )

Adjusted income before income taxes (non-GAAP)

  $ 205     $ 677     $ 1,035  





Calculation of Earnings (Loss) Before Interest and Taxes (EBIT):


(Loss) income from continuing operations before income taxes

  $ (423 )   $ 524     $ 1,240  

Interest expense, net

    (9 )     (15 )     (14 )


  $ (414 )   $ 539     $ 1,254  





Adjusted income before income taxes

  $ 205     $ 677     $ 1,035  

Interest expense, net

    (9 )     (15 )     (14 )

Adjusted EBIT (non-GAAP)

  $ 214     $ 692     $ 1,049  





EBIT margin %

    (5.1 )%     6.2 %     14.0 %

Adjusted EBIT margin %

    2.6 %     7.9 %     11.7 %

After-tax income:


Net (loss) income attributable to Foot Locker, Inc.

  $ (330 )   $ 342     $ 893  

After-tax adjustments excluded from GAAP:


Impairment and other, net of income tax benefit of $18, $21, and $42, respectively (1)

    62       91       130  

Other expense / income, net of income tax (benefit) expense of ($142), ($9), and $99, respectively (2)

    406       32       (278 )

Net loss from discontinued operations, net of income tax benefit of $-, $1, and $-, respectively (3)


Tax reserves benefit / charge (4)

    (4 )     5        

Tax benefits related to tax law rate changes (5)

                (1 )

Tax charge related to revaluation of certain intellectual property rights (6)


Adjusted net income (non-GAAP)

  $ 134     $ 473     $ 755  





Earnings per share:


Diluted EPS

  $ (3.51 )   $ 3.58     $ 8.61  

Diluted EPS amounts excluded from GAAP:


Impairment and other (1)

    0.66       0.95       1.24  

Other expense / income, net (2)

    4.31       0.33       (2.68 )

Net loss from discontinued operations (3)


Tax reserves benefit / charge (4)

    (0.04 )     0.05        

Tax benefits related to tax law rate changes (5)

                (0.01 )

Tax charge related to revaluation of certain intellectual property rights (6)


Adjusted diluted EPS (non-GAAP)

  $ 1.42     $ 4.95     $ 7.27  





Net (loss) income margin %

    (4.0 )%     3.9 %     10.0 %

Adjusted net income margin %

    1.6 %     5.4 %     8.4 %


2023 Form 10-K Page 23


Notes on Non-GAAP Adjustments



For 2023, 2022, and 2021, we recorded impairment and other of $80 million ($62 million after tax), $112 million ($91 million after tax), $172 million ($130 million after tax), respectively. See the "Impairment and Other" section for further information.



During 2023, 2022, and 2021, we recorded other expense of $548 million ($406 million after tax), and $41 million ($32 million after tax), and other income of $377 million ($278 million after-tax), respectively. These adjustments represent fair value and other changes in minority investments, pension settlement charges, and gains on sales of properties and businesses. See Note 5, "Other (Expense) Income, net" for further information.



We recognized a charge to discontinued operations of $4 million ($3 million after tax) during the fourth quarter of 2022 related to the resolution of a legal matter of a business we formerly operated. 



In the first quarter of 2023, we recorded a $4 million benefit related to income tax reserves due to a statute of limitations release. In the second quarter of 2022, we recorded a $5 million charge related to our income tax reserves due to the resolution of a foreign tax settlement.



We recognized a tax charge of $1 million during the fourth quarters of 2021 in connection with tax law changes in the Netherlands.



We recorded a tax charge related to the revaluation of certain intellectual property rights, pursuant to a non-U.S. advance pricing agreement of $11 million for 2021.


Return on Invested Capital


ROIC is presented below and represents a non-GAAP measure. We believe ROIC is a meaningful measure because it quantifies how efficiently we generated operating income relative to the capital we have invested in the business. ROIC, subject to certain adjustments, is also used as a measure in executive long-term incentive compensation.


The closest U.S. GAAP measure to ROIC is Return on Assets (“ROA”) and is also presented below. ROA is calculated as net income attributable to Foot Locker, Inc. in the fiscal year divided by the two-year average of total assets. ROA decreased to (4.5)% as compared with 4.3% in the prior year. This decrease reflected a net loss in 2023 as compared with net income in 2022. Our ROIC decreased to 3.8% in 2023, as compared with 9.2% in the prior year. The overall decrease in ROIC reflected a decrease in adjusted return after taxes in 2023.









ROA (1)

    (4.5 )%     4.3 %     11.8 %


    3.8 %     9.2 %     16.4 %



Represents net (loss) income attributable to Foot Locker, Inc. of ($330) million, $342 million, and $893 million divided by average total assets of $7,388 million, $8,021 million, and $7,589 million for 2023, 2022, and 2021, respectively.


Calculation of ROIC


($ in millions)







Adjusted EBIT

$ 214   $ 692   $ 1,049  

+ Interest component of straight-line rent expense (1)

  133     136     144  

Adjusted net operating profit

  347     828     1,193  

- Adjusted income tax expense (2)

  (107 )   (244 )   (321 )

+ Net loss attributable to noncontrolling interests

      1     1  

= Adjusted return after taxes

$ 240   $ 585   $ 873  

Average total assets

$ 7,388   $ 8,021   $ 7,589  

- Average cash and cash equivalents

  (417 )   (670 )   (1,242 )

- Average non-interest bearing current liabilities

  (927 )   (1,109 )   (1,060 )

- Average merchandise inventories

  (1,576 )   (1,455 )   (1,095 )

+ 13‑month average merchandise inventories

  1,804     1,569     1,116  

= Average invested capital

$ 6,272   $ 6,356   $ 5,308  


  3.8 %   9.2 %   16.4 %



Represents the add-back to operating income driven by the hypothetical interest expense we would incur if the property under our operating leases were owned or accounted for as finance leases. Calculated using the discount rate for each operating lease recorded as a component of rent expense. Operating lease interest is added back to adjusted net operating profit in the ROIC calculation to account for differences in capital structure between us and our competitors.


The adjusted income tax expense represents the marginal tax rate applied to adjusted net operating profit for each of the periods presented.


2023 Form 10-K Page 24


Segment Reporting and Results of Operations


We have determined that we have three operating segments, North America, EMEA, and Asia Pacific. Our North America operating segment includes the results of the following banners operating in the U.S. and Canada: Foot Locker, Champs Sports, Kids Foot Locker, and WSS, including each of their related e-commerce businesses. Our EMEA operating segment includes the results of the Foot Locker and Kids Foot Locker banners operating in Europe, including each of their related e-commerce businesses. Our Asia Pacific operating segment includes the results of the Foot Locker banner and its related e-commerce business operating in Australia, New Zealand, and Asia, as well as atmos, which operates primarily in Asia. We have further aggregated these operating segments into one reportable segment based upon their shared customer base and similar economic characteristics.


As previously announced, during the second quarter of 2023, we ceased operating the Sidestep banner and closed the stores operating in Hong Kong and Macau. Additionally during the second quarter of 2023, we sold our Singapore and Malaysia businesses to our license partner. Our license partner now operates those stores under a licensing agreement. During the fourth quarter of 2023, we closed our atmos U.S. stores and e-commerce business.




Comparable sales is a key performance indicator for us. All references to comparable-store sales for a given period relate to sales of stores that were open at the period-end and had been open for more than one year. The computation of consolidated comparable sales also includes direct-to-customers sales as a result of our omnichannel strategy. We view our e-commerce business as an extension of our physical stores. Stores opened or closed during the period are not included in the comparable-store base; however, stores closed temporarily for relocation or remodeling are included. Computations exclude the effect of foreign currency fluctuations. Comparable-store sales for 2023 do not include sales from the 53rd week.


Sales from acquired businesses that include inventory are included in the computation of comparable-store sales after 15 months of operations. Accordingly, sales of WSS and atmos were included effective January 2023 and March 2023, respectively. 


The information shown below represents certain sales metrics by sales channel:


($ in millions)








Store sales

  $ 6,751     $ 7,219     $ 7,029  

$ Change

  $ (468 )   $ 190    


% Change

    (6.5 )%     2.7 %  


% of total sales

    82.8 %     82.5 %     78.5 %

Comparable sales (decrease) increase

    (6.5 )%     3.7 %     25.8 %

Direct-to-customer sales

  $ 1,403     $ 1,528     $ 1,929  

$ Change

  $ (125 )   $ (401 )  


% Change

    (8.2 )%     (20.8 )%  


% of total sales

    17.2 %     17.5 %     21.5 %

Comparable sales decrease

    (7.4 )%     (21.2 )%     (10.6 )%

Total sales

  $ 8,154     $ 8,747     $ 8,958  

$ Change

  $ (593 )   $ (211 )  


% Change

    (6.8 )%     (2.4 )%  


Comparable sales (decrease) increase

    (6.7 )%     (1.9 )%     62.8 %


In 2023, sales decreased by 6.8% to $8,154 million from sales of $8,747 million in 2022. Excluding the effect of foreign currency fluctuations, sales decreased by 7.0% as compared with 2022. Results from 2023 include the effect of the 53rd week, which represented sales of $98 million.


2023 Form 10-K Page 25



Constant Currencies


Comparable Sales


Foot Locker

    (2.7 )%     (2.3 )

Champs Sports

    (22.2 )     (20.4 )

Kids Foot Locker

    1.1       0.2  


    6.0       (6.8 )


    n.m.       n.m.  

North America

    (8.5 )%     (8.7 )

Foot Locker

    1.0 %     (0.8 )


    n.m.       n.m.  


    (3.1 )%     (2.1 )

Foot Locker

    (3.1 )%     4.7  


    0.5       (2.1 )

Asia Pacific

    (2.0 )%     2.6  

Total Foot Locker, Inc.

    (7.0 )%     (6.7 )


Comparable sales decreased by 6.7% as compared with the prior year. By operating segment, North America and EMEA had decreases of 8.7% and 2.1%, respectively, while Asia Pacific generated an increase of 2.6%. Comparable sales decreased in both our stores and direct-to-customer channels in 2023, due to ongoing macroeconomic headwinds as our customers become more discerning due to inflation and other cost pressures, which affected customer traffic and conversion, as well as changing vendor mix coupled with the repositioning of our Champs Sports banner. We are repositioning the Champs Sports banner to serve the active athlete, which resulted in expected comparable sales declines due to the transition.


For the combined channels, sales excluding foreign currency fluctuations, declined in all the regions we operate. North America sales were negatively affected by the closure of Eastbay business, which ceased operating in late 2022, as well as the repositioning of Champs Sports. Eastbay's sales primarily represent the other category, and excluding those sales the decline for North America would have been decline of 6.9%. Constant currency sales for EMEA decreased primarily from the closure of the Sidestep banner in the second quarter of 2023. Excluding the sales from the Sidestep banner, constant currency sales for our Foot Locker stores operating in EMEA increased by 1.0%. Asia Pacific's sales decreased primarily as a result of our strategic decisions to close our operations in Hong Kong and Macau and to sell our Singapore and Malaysia operations to our licensing partner. Within Asia Pacific, combined sales for our operations in Australia, New Zealand, and South Korea generated positive comparable sales.  Our atmos operations were negatively affected by foreign currency fluctuations, however generated a positive increase excluding currency movements. On a comparable basis, atmos was negatively affected by declines in availability of key styles and reduced tourism.


From a product perspective for the combined channels, the sales decrease in 2023 was across footwear, apparel, and accessories. 


Gross Margin









Gross margin rate

    27.7 %     31.9 %     34.4 %

Basis point decrease in the gross margin rate

    (420 )     (250 )      

Components of the change:





Merchandise margin rate decline

    (340 )     (240 )  


Higher occupancy and buyers’ compensation expense rate

    (80 )     (10 )  



Gross margin is calculated as sales minus cost of sales. Cost of sales includes the cost of merchandise, freight, distribution costs including related depreciation expense, shipping and handling, occupancy and buyers’ compensation. Occupancy costs include rent (including fixed common area maintenance charges and other fixed non-lease components), real estate taxes, general maintenance, and utilities.


The gross margin rate decreased in 2023 by 420 basis points as compared to the prior year, reflecting higher promotional activity in the current marketplace and markdowns recorded to reduce overall inventory levels and improve aging. Other factors that negatively affected the rate were higher cost of merchandise and increased shrink. The occupancy rate deleverage reflected the fixed nature of these costs in relation to the decline in sales.


2023 Form 10-K Page 26


Selling, General and Administrative Expenses (SG&A)


($ in millions)









  $ 1,852     $ 1,903     $ 1,851  

$ Change

  $ (51 )   $ 52    


% Change

    (2.7 )%     2.8 %  


SG&A as a percentage of sales

    22.7 %     21.8 %     20.7 %


SG&A decreased by $51 million, or 2.7%, in 2023, as compared with the prior year. As a percentage of sales, the SG&A rate increased by 90 basis points as compared with 2022. Excluding the effect of foreign currency fluctuations, SG&A decreased by $60 million, or 3.2%, as compared with the prior year.


The increase in SG&A, as a percentage of sales, primarily reflected deleverage from the decline in sales, coupled with pressures from inflation and investments in front-line wages and technology aimed at improving the omnichannel experience and customer data analytics. Partially offsetting these increases were lower incentive compensation expense due to the Company's underperformance relative to targets and savings from our cost optimization program.


Depreciation and Amortization


($ in millions)








Depreciation and amortization

  $ 199     $ 208     $ 197  

$ Change

  $ (9 )   $ 11          

% Change

    (4.3 )%     5.6 %  



Depreciation and amortization decreased by $9 million as compared with the prior year. Excluding the effect of foreign currency fluctuations, depreciation and amortization decreased by $10 million primarily due operating fewer stores and the effect from impairments recorded in the current and prior year.


Operating Results


Division profit was $264 million, or 3.2% of sales in 2023. This compares with $844 or 9.6% of sales, for the prior year. The decrease was driven by both sales channels experiencing declines in sales coupled with lower gross margins due to the promotional environment and deleveraging expenses, while cost-cutting program benefits were not enough to offset the decline in sales.


Impairment and Other


For 2023, impairment and other included impairment charges of $30 million from a review of underperforming stores and accelerated tenancy charges on right-of-use assets for closures of the Sidestep banner, certain Foot Locker Asia stores, and our U.S. atmos stores. Additionally, we incurred transformation consulting expense of $27 million and reorganization costs of $17 million primarily related to severance and the closures of the Sidestep banner, certain Foot Locker Asia stores, and a North American distribution center. The results for 2023 also included intangible asset impairment of $9 million on an atmos tradename, partially offset by a $4 million reduction in the fair value of the atmos contingent consideration.


For 2022, impairment and other charges included $58 million of impairment of long-lived assets and right-of-use assets and accelerated tenancy charges, $42 million of transformation consulting, $22 million of primarily severance costs related to a reorganization, $9 million of litigation costs related to an employment matter, $8 million of Sidestep tradename asset impairment, and $4 million of acquisition integration costs, partially offset by a $31 million reduction in the fair value of the atmos contingent consideration liability.


See Note 4, "Impairment and Other" for additional information.


Corporate Expense


($ in millions)








Corporate expense

  $ 42     $ 151     $ 129  

$ Change

  $ (109 )   $ 22        


2023 Form 10-K Page 27


Corporate expense consists of unallocated general and administrative expenses as well as depreciation and amortization related to our corporate headquarters, centrally managed departments, unallocated insurance and benefit programs, certain foreign exchange transaction gains and losses, and other items. The allocation of corporate expense to the operating divisions is adjusted annually based upon an internal study.


Depreciation and amortization included in corporate expense was $36 million and $39 million in 2023 and 2022, respectively. Excluding the changes in depreciation and amortization, corporate expense decreased primarily due to an increase in the allocation of corporate expense to the banners in 2023 and lower incentive compensation expense, including share-based compensation expense that is tied to performance, partially offset by our ongoing investments in information technology.


Interest Expense, net


($ in millions)








Interest expense

  $ (24 )   $ (24 )   $ (17 )

Interest income

    15       9       3  

Interest expense, net

  $ (9 )   $ (15 )   $ (14 )

Weighted-average interest rate (excluding fees)

    3.9 %     3.8 %     4.8 %


We recorded net interest expense of $9 million in 2023, compared to $15 million in 2022. Interest income increased primarily due to higher interest rates earned on our cash and cash equivalents coupled with higher interest earned on our cross-currency swap.


Other (Expense) Income, net


($ in millions)








Other (expense) income, net

  $ (556 )   $ (42 )   $ 384  


This caption generally includes non-operating items, including changes in fair value of minority investments measured at fair value or using the fair value measurement alternative, gains on sales of businesses or assets, changes in the market value of our available-for-sale security, our share of earnings or losses related to our equity method investments, and net benefit (expense) related to our pension and postretirement programs excluding the service cost component.


During 2023, we recorded an impairment of $478 million on a minority investment due to the decreased valuation resulting from the investee's underperformance and continued losses. The minority investment is accounted for using the fair value measurement alternative, which is at cost adjusted for changes in observable prices minus impairment under the practicability exception. We assess the carrying value of this investment for impairment whenever events or circumstances indicate that the carrying value may not be recoverable, and consider factors including, but not limited to, expected cash flows, underperformance relative to its plans and continued losses of the investee. We estimated the fair value using both a discounted cash flow approach and a market approach, which consider forecasted cash flows provided by the investee's management, as well as assumptions over discount rates, terminal values, and selected comparable companies.


During the fourth quarter of 2023, as part of efforts to reduce our pension plan obligations, we transferred approximately $109 million of our U.S. Qualified pension plan registered assets and liabilities to an insurance company through the purchase of a group annuity contract, under which an insurance company is required to directly pay and administer pension payments to certain of our pension plan participants, or their designated beneficiaries. In connection with this transaction, we recorded a non-cash pretax settlement charge of $75 million. This settlement charge accelerated the recognition of previously unrecognized losses in "Accumulated Other Comprehensive Loss."


During 2022, we sold our investment in a publicly traded stock, Retailors, Ltd. for a loss of $62 million, offset by $1 million of dividend income. Partially offsetting the loss was a $19 million gain on the divestiture of our Team Sales business.


See Note 5, "Other (Expense) Income, net" for additional information.


Income Taxes


($ in millions)








Income tax (benefit) expense

  $ (93 )   $ 180     $ 348  

Effective tax rate

    22.0 %     34.3 %     28.1 %


2023 Form 10-K Page 28


We recorded an income tax benefit of $93 million in 2023, or an effective rate of 22.0%, as compared with income tax expense of $180 million or 34.3% in 2022. The change in the effective tax rate reflected several factors, including the effects of non-deductible losses, as well as the level and geographic mix of income. The effective tax rate in 2023 included a 200-basis point deferred tax asset adjustment which negatively affected the tax rate.


We regularly assess the adequacy of provisions for income tax contingencies in accordance with the applicable authoritative guidance on accounting for income taxes. As a result, reserves for unrecognized tax benefits may be adjusted due to new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of limitations. We recorded a $4 million reserve release in 2023 from a statute of limitations expiration on our foreign income taxes, as well as other various reserve releases totaling $4 million due to settlements of international tax examinations. During 2022, we recorded a $5 million charge related to our income tax reserves due to the resolution of a foreign tax settlement. Partially offsetting this charge in 2022 were tax benefits totaling $3 million from reserves releases due to various statute of limitation lapses. The changes in the tax reserves were not significant in 2021.


On August 16, 2022, President Biden signed the Inflation Reduction Act ("IRA") of 2022 into law. The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022. We do not currently expect the IRA tax provisions will have a significant effect on our overall effective tax rate. There were no share repurchases during 2023, thus no incremental excise tax paid. 


The Organization for Economic Co-operation and Development Pillar Two guidelines published to date include transition and safe harbor rules around the implementation of the Pillar Two global minimum tax of 15%. Based on current enacted legislation effective in 2024 and our structure, we do not currently expect a significant effect on our overall effective tax rate for 2024. We are monitoring developments and evaluating the effects that these new rules will have on our future effective income tax rate, tax payments, financial condition, and results of operations.


Liquidity and Capital Resources




Our primary source of liquidity has been cash flow from operations, while the principal uses of cash have been to pay down liabilities and other working capital requirements; finance capital expenditures related to store openings, store remodelings, internet and mobile sites, information systems, and other support facilities; quarterly dividend payments; and interest payments; and fund other cash requirements to support the development of our short-term and long-term operating strategies. We generally finance real estate with operating leases. We believe our cash, cash equivalents, future cash flow from operations, and amounts available under our credit agreement will be adequate to fund these requirements.


We may also repurchase our common stock through open market purchases, privately negotiated transactions, or otherwise, including through Rule 10b5-1 trading plans. Such repurchases if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. On February 24, 2022, the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $1.2 billion of its common stock. The new share repurchase program does not have an expiration date and as of February 3, 2024, approximately $1.1 billion remained available. Our board’s authorization of the share repurchase program does not obligate us to acquire any particular amount of common stock, and the repurchase program may be commenced, suspended, or discontinued at any time.


The Board of Directors regularly reviews the dividend policy and rate, taking into consideration the overall financial and strategic outlook of our earnings, liquidity, and cash flow. We do not currently expect to pay dividends to allow us to invest in our strategic priorities, such as modernizing our technology infrastructure and stores.


Any material adverse change in customer demand, fashion trends, competitive market forces, or customer acceptance of our merchandise mix and retail locations, uncertainties related to the effect of competitive products and pricing, our reliance on a few key suppliers for a significant portion of our merchandise purchases and risks associated with global product sourcing, economic conditions worldwide, the effects of currency fluctuations, as well as other factors listed under the heading “Disclosure Regarding Forward-Looking Statements,” could affect our ability to continue to fund our liquidity needs from business operations.


2023 Form 10-K Page 29


Maintaining access to merchandise that we consider appropriate for our business may be subject to the policies and practices of our key suppliers. Therefore, we believe that it is critical to continue to maintain satisfactory relationships with these key suppliers. We purchased 84% and 86% of our merchandise from our top five suppliers in 2023 and 2022, respectively. Approximately 65% was purchased from one supplier, Nike, Inc., in both 2023 and 2022.


Planned capital expenditures in 2024 are $285 million, of which $200 million is dedicated to real estate projects designed to elevate our customers’ in-store experience. This includes the updating of approximately 400 existing stores to our current design standards and will incorporate key elements of our current brand design specifications. Spending for 2024 also includes the planned opening of approximately 20 new WSS stores and 15 new Foot Locker and Kids Foot Locker stores, representing the continued expansion of our off-mall community-based and “power” store formats, which provide pinnacle retail experiences that deliver connected customer interactions through service, experience, product, and a sense of community. Finally, the capital plan for 2023 also includes $85 million primarily for our technology and supply chain initiatives, including capital expenditures related to two new distribution centers. We also expect to spend an additional $60 million in software-as-a-service implementation costs related to our technology initiatives as we modernize our enterprise resource planning tools including e-commerce, supply chain, and finance. We have the ability to revise and reschedule some of the anticipated spending program should our financial position require it.


Operating Activities


($ in millions)








Net cash provided by operating activities

  $ 91     $ 173     $ 666  

$ Change

  $ (82 )  




The amount provided by operating activities reflects net (loss) income adjusted for non-cash items and working capital changes. Adjustments to net income for non-cash items include impairment and other, pension settlement charge, fair value adjustments to our minority investments, depreciation and amortization, deferred income taxes, and share-based compensation expense. The decrease in cash from operating activities reflected lower net income, partially offset by timing of merchandise purchases and payments of accounts payable, as compared to the prior year. 


Investing Activities


($ in millions)








Net cash used in investing activities

  $ (222 )   $ (162 )   $ (1,376 )

$ Change

  $ (60 )  




The increase in cash used in investing activities primarily reflected lower capital expenditures coupled with the prior-year sale of one of our minority investments and a sale of a business.


Capital expenditures in 2023 decreased to $242 million from $285 million in the prior year, which was elevated as several large projects related to 2021 were paid in the first quarter of 2022. During 2023, we completed the remodeling or relocation of 136 existing stores, the build-out of 79 new stores, and made progress on the development of information systems, websites, and infrastructure, including supply chain initiatives.  During 2023 we made meaningful progress as we continue to implement our strategic initiative to power-up our portfolio of stores. Capital expenditures in 2023 included 69 new stores in our "power" or "community" doors concept, bringing the total to 242 in operation as of February 3, 2024.


During 2023, we sold our businesses operating in Singapore and Malaysia for total cash consideration of $24 million, or $16 million net of $8 million of cash in the business. We also sold a corporate office property in North America for proceeds of $6 million. Additionally, we invested $2 million and $5 million in 2023 and 2022, respectively, in minority investments with various limited partner venture capital funds managed by Black fund managers, who are committed to advancing diverse-led businesses as part of our Leading in Education and Economic Development (LEED) initiative. 


During 2022, we sold our investment in a public entity (Retailors, Ltd.) generating cash of $83 million and dissolved a joint venture for proceeds of $12 million. Also during 2022, we sold our Eastbay Team Sales business receiving proceeds of $47 million.


Financing Activities


($ in millions)








Net cash used in financing activities

  $ (120 )   $ (279 )   $ (152 )

$ Change

  $ 159    




2023 Form 10-K Page 30


Cash used in financing activities consisted primarily of our return to shareholders initiatives, as follows:


($ in millions)








Dividends paid on common stock

  $ 113     $ 150     $ 101  

Share Repurchases

          129       348  

Total returned to shareholders

  $ 113     $ 279     $ 449  


We declared and paid $113 million in dividends representing a quarterly rate of $0.40 per share paid out in the first, second and third quarters of 2023, as compared with $129 million in dividends in 2022, representing a quarterly rate of $0.40 per share paid out in each quarter in the prior year. No shares of our common stock were repurchased pursuant to our share repurchase program during 2023, as compared with $129 million repurchased during 2022. We paid $10 million during 2023 to satisfy tax withholding obligations related to vesting of share-based equity awards.


From November 3, 2023 through December 5, 2023, in order to fund working capital needs for the holiday selling season, we borrowed varying amounts under our credit facility, with $146 million of aggregate borrowings and no more than $89 million outstanding during that time. No borrowings remained outstanding as of February 3, 2024.


Free Cash Flow (non-GAAP measure)


In addition to net cash provided by operating activities, we use free cash flow as a useful measure of performance and as an indication of our financial strength and our ability to generate cash. We define free cash flow as net cash provided by operating activities less capital expenditures (which is classified as an investing activity). We believe the presentation of free cash flow is relevant and useful for investors because it allows investors to evaluate the cash generated from underlying operations in a manner similar to the method used by management. Free cash flow is not defined under U.S. GAAP. Therefore, it should not be considered a substitute for income or cash flow data prepared in accordance with U.S. GAAP and may not be comparable to similarly titled measures used by other companies. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The following table presents a reconciliation of net cash flow provided by operating activities, the most directly comparable U.S. GAAP financial measure, to free cash flow.


($ in millions)








Net cash provided by operating activities

  $ 91     $ 173     $ 666  

Free cash flow

  $ (151 )   $ (112 )   $ 457  


Capital Structure


We maintain a credit facility for working capital and general corporate purposes. We currently have a $600 million asset-based revolving credit facility that is scheduled to expire on July 14, 2025. No borrowings were outstanding as of February 3, 2024. The amount of borrowing availability under our credit facility is reduced by the amount of standby and commercial letters of credit outstanding, which are not significant.


Credit Rating


As of March 28, 2024, our corporate credit ratings from Standard & Poor’s and Moody’s Investors Service are BB and Ba2, respectively. In addition, Moody’s Investors Service has rated our senior unsecured notes Ba3.


Off-Balance Sheet Arrangements


We have not entered into any transactions with unconsolidated entities that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity. Also, our financial policies prohibit the use of derivatives for which there is no underlying exposure.


Critical Accounting Policies


Our responsibility for integrity and objectivity in the preparation and presentation of the financial statements requires application of appropriate accounting policies. Generally, our accounting policies and methods are those specifically required by U.S. GAAP. Included in the Summary of Significant Accounting Policies note in “Item 8. Consolidated Financial Statements and Supplementary Data” is a summary of the most significant accounting policies. In some cases, we are required to calculate amounts based on estimates for matters that are inherently uncertain. We believe the following to be the most critical of those accounting policies that necessitate subjective judgments.


2023 Form 10-K Page 31