FOOT LOCKER, INC. [FL] Filings

10-Q 1 floc20240803_10q.htm FORM 10-Q floc20240803_10q.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: August 3, 2024

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 1-10299

(Exact name of registrant as specified in its charter)

New York	13-3513936
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

330 West 34th Street, New York, New York	10001
(Address of principal executive offices)	(Zip Code)

(212-720-3700)

(Registrant’s telephone number, including area code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	FL	New York Stock Exchange

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, a 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 provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Number of shares of Common Stock outstanding as of August 31, 2024: 94,851,932

Table of Contents

TABLE OF CONTENTS

			Page
PART I	FINANCIAL INFORMATION		1
	Item 1.	Financial Statements (Unaudited)	1
		Condensed Consolidated Balance Sheets (Unaudited)	1
		Condensed Consolidated Statements of Operations (Unaudited)	2
		Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)	3
		Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)	4
		Condensed Consolidated Statements of Cash Flows (Unaudited)	5
		Notes to the Unaudited Condensed Consolidated Financial Statements (Unaudited)	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
	Item 4.	Controls and Procedures	24

PART II	OTHER INFORMATION		24
	Item 1.	Legal Proceedings	24
	Item 1A.	Risk Factors	24
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
	Item 3.	Defaults Upon Senior Securities	25
	Item 4.	Mine Safety Disclosures	25
	Item 5.	Other Information	25
	Item 6.	Exhibits	26

SIGNATURE			27

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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” of our most recent Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission 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.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	*August 3,*			*July 29,*			*February 3,*
($ in millions, except share amounts)	*2024*			*2023*			2024*
ASSETS

Current assets:
Cash and cash equivalents	$	291		$	180		$	297
Merchandise inventories		1,648			1,831			1,509
Other current assets		404			360			419
		2,343			2,371			2,225
Property and equipment, net		905			898			930
Operating lease right-of-use assets		2,173			2,266			2,188
Deferred taxes		130			94			114
Goodwill		764			774			768
Other intangible assets, net		393			415			399
Minority investments		150			629			152
Other assets		95			89			92
	$	6,953		$	7,536		$	6,868

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	487		$	514		$	366
Accrued and other liabilities		424			419			428
Current portion of debt and obligations under finance leases		5			6			5
Current portion of lease obligations		496			513			492
		1,412			1,452			1,291
Long-term debt and obligations under finance leases		440			444			442
Long-term lease obligations		1,978			2,071			2,004
Other liabilities		226			322			241
Total liabilities		4,056			4,289			3,978
Commitments and contingencies
Shareholders’ equity:
Common stock and paid-in capital: 95,023,049; 94,253,029; and 94,283,984 shares issued, respectively		794			767			776
Retained earnings		2,478			2,881			2,482
Accumulated other comprehensive loss		(370	)		(397	)		(366	)
Less: Treasury stock at cost: 182,825; 98,990; and 60,308 shares, respectively		(5	)		(4	)		(2	)
Total shareholders' equity		2,897			3,247			2,890
	$	6,953		$	7,536		$	6,868

The balance sheet at February 3, 2024 has been derived from the previously reported audited consolidated financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Foot Locker, Inc.’s Annual Report on Form 10-K for the year ended February 3, 2024.

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2024 Form 10-Q Page 1

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	*Thirteen weeks ended*						*Twenty-six weeks ended*
	*August 3,*			*July 29,*			*August 3,*			*July 29,*
($ in millions, except per share amounts)	*2024*			*2023*			*2024*			*2023*
Sales	$	1,896		$	1,861		$	3,770		$	3,788
Licensing revenue		4			3			9			7
Total revenue		1,900			1,864			3,779			3,795

Cost of sales		1,373			1,357			2,708			2,706
Selling, general and administrative expenses		476			442			937			873
Depreciation and amortization		51			50			102			101
Impairment and other		9			14			23			53
(Loss) income from operations		(9	)		1			9			62

Interest expense, net		(3	)		(4	)		(4	)		(5	)
Other (expense) income, net		(2	)		—			(6	)		(3	)
(Loss) income before income taxes		(14	)		(3	)		(1	)		54
Income tax (benefit) expense		(2	)		2			3			23
Net (loss) income	$	(12	)	$	(5	)	$	(4	)	$	31

Basic (loss) earnings per share	$	(0.13	)	$	(0.05	)	$	(0.04	)	$	0.33
Weighted-average shares outstanding		95.0			94.2			94.8			94.0

Diluted (loss) earnings per share	$	(0.13	)	$	(0.05	)	$	(0.04	)	$	0.33
Weighted-average shares outstanding, assuming dilution		95.0			94.2			94.8			95.0

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2024 Form 10-Q Page 2

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

	*Thirteen weeks ended*						*Twenty-six weeks ended*
	*August 3,*			*July 29,*			*August 3,*			*July 29,*
($ in millions)	*2024*			*2023*			*2024*			*2023*
Net (loss) income	$	(12	)	$	(5	)	$	(4	)	$	31
Other comprehensive income (loss), net of income tax

Foreign currency translation adjustment:
Translation adjustment arising during the period, net of income tax benefit of $-, $-, $-, and $-, respectively		9			—			(10	)		(7	)

Hedges contracts:
Change in fair value of derivatives, net of income tax expense (benefit) of $1, $(1), $-, and $(1), respectively		4			(3	)		3			(2	)

Pension and postretirement adjustments:
Amortization of net actuarial loss and prior service cost included in net periodic benefit costs, net of income tax expense of $-, $-, $1, and $1, respectively		2			2			3			4
Comprehensive income (loss)	$	3		$	(6	)	$	(8	)	$	26

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2024 Form 10-Q Page 3

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

	*Additional Paid-In*														*Accumulated*
	*Capital &*														*Other*			*Total*
Thirteen weeks ended	*Common Stock*					*Treasury Stock*						*Retained*			*Comprehensive*			*Shareholders'*
(shares in thousands, $ in millions)	*Shares*		*Amount*			*Shares*			*Amount*			*Earnings*			*Loss*			*Equity*
Balance at May 4, 2024		94,940	$	787			(231	)	$	(6	)	$	2,490		$	(385	)		2,886
Restricted stock issued		52		—															—
Issued under director and stock plans		31		1															1
Share-based compensation expense				7															7
Shares of common stock used to satisfy tax withholding obligations							(14	)		(1	)								(1	)
Reissued for Employee Stock Purchase Plan				(1	)		62			2									1
Net loss													(12	)					(12	)
Translation adjustment, net of tax																9			9
Change in hedges, net of tax																4			4
Pension and postretirement adjustments, net of tax																2			2
Balance at August 3, 2024		95,023	$	794			(183	)	$	(5	)	$	2,478		$	(370	)	$	2,897

Balance at April 29, 2023		94,176	$	766			(261	)	$	(10	)	$	2,923		$	(396	)	$	3,283
Restricted stock issued		25		—															—
Issued under director and stock plans		52		2															2
Share-based compensation expense				2															2
Shares of common stock used to satisfy tax withholding obligations							(5	)		—									—
Reissued for Employee Stock Purchase Plan				(3	)		167			6									3
Net loss													(5	)					(5	)
Cash dividends on common stock ($0.40 per share)													(37	)					(37	)
Translation adjustment, net of tax																—			—
Change in hedges, net of tax																(3	)		(3	)
Pension and postretirement adjustments, net of tax																2			2
Balance at July 29, 2023		94,253	$	767			(99	)	$	(4	)	$	2,881		$	(397	)	$	3,247

	*Additional Paid-In*														*Accumulated*
	*Capital &*														*Other*			*Total*
Twenty-six weeks ended	*Common Stock*					*Treasury Stock*						*Retained*			*Comprehensive*			*Shareholders'*
(shares in thousands, $ in millions)	*Shares*		*Amount*			*Shares*			*Amount*			*Earnings*			*Loss*			*Equity*
Balance at February 3, 2024		94,284	$	776			(60	)	$	(2	)	$	2,482		$	(366	)	$	2,890
Restricted stock issued		469		—															—
Issued under director and stock plans		270		6															6
Share-based compensation expense				13															13
Shares of common stock used to satisfy tax withholding obligations							(185	)		(5	)								(5	)
Reissued for Employee Stock Purchase Plan				(1	)		62			2									1
Net loss													(4	)					(4	)
Translation adjustment, net of tax																(10	)		(10	)
Change in hedges, net of tax																3			3
Pension and postretirement adjustments, net of tax																3			3
Balance at August 3, 2024		95,023	$	794			(183	)	$	(5	)	$	2,478		$	(370	)	$	2,897

Balance at January 28, 2023		93,397	$	760			(1	)	$	—		$	2,925		$	(392	)	$	3,293
Restricted stock issued		653		—															—
Issued under director and stock plans		203		6															6
Share-based compensation expense				4															4
Shares of common stock used to satisfy tax withholding obligations							(265	)		(10	)								(10	)
Reissued for Employee Stock Purchase Plan				(3	)		167			6									3
Net income													31						31
Cash dividends on common stock ($0.80 per share)													(75	)					(75	)
Translation adjustment, net of tax																(7	)		(7	)
Change in hedges, net of tax																(2	)		(2	)
Pension and postretirement adjustments, net of tax																4			4
Balance at July 29, 2023		94,253	$	767			(99	)	$	(4	)	$	2,881		$	(397	)	$	3,247

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2024 Form 10-Q Page 4

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	*Twenty-six weeks ended*
	*August 3,*			*July 29,*
($ in millions)	*2024*			*2023*
From operating activities:
Net (loss) income	$	(4	)	$	31
Adjustments to reconcile net (loss) income to net cash from operating activities:
Non-cash impairment and other		16			21
Depreciation and amortization		102			101
Deferred income taxes		(29	)		(3	)
Share-based compensation expense		13			4
Gain on sales of businesses		—			(2	)
Change in assets and liabilities:
Merchandise inventories		(143	)		(194	)
Accounts payable		123			23
Accrued and other liabilities		31			(97	)
Other, net		17			(68	)
Net cash provided by (used in) operating activities		126			(184	)
From investing activities:
Capital expenditures		(132	)		(105	)
Minority investments		(1	)		(1	)
Proceeds from sales of businesses		—			10
Net cash used in investing activities		(133	)		(96	)
From financing activities:
Payment of debt issuance costs		(4	)		—
Dividends paid on common stock		—			(75	)
Shares of common stock repurchased to satisfy tax withholding obligations		(5	)		(10	)
Payment of obligations under finance leases		(3	)		(3	)
Proceeds from exercise of stock options		5			5
Treasury stock reissued under employee stock plan		2			3
Net cash used in financing activities		(5	)		(80	)
Effect of exchange rate fluctuations on cash, cash equivalents, and restricted cash		—			3
Net change in cash, cash equivalents, and restricted cash		(12	)		(357	)
Cash, cash equivalents, and restricted cash at beginning of year		334			582
Cash, cash equivalents, and restricted cash at end of period	$	322		$	225

Supplemental information:
Interest paid	$	12		$	9
Income taxes paid		35			75
Cash paid for amounts included in measurement of operating lease liabilities		339			344
Cash paid for amounts included in measurement of finance lease liabilities		4			4
Right-of-use assets obtained in exchange for operating lease obligations		263			89
Assets obtained in exchange for finance lease obligations		1			—

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Second Quarter 2024 Form 10-Q Page 5

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Business

Foot Locker, Inc., together with its consolidated subsidiaries (“Foot Locker,” “Company,” “we,” “our,” and “us”), is a leading footwear and apparel retailer. We have integrated all available shopping channels, including stores, websites, apps, and social channels. Store sales are primarily fulfilled from the store’s inventory, but may also be shipped from any of our distribution centers or from a different store location if an item is not available at the original store. Direct-to-customer orders are generally shipped to our customers through our distribution centers but may also be shipped from any store or a combination of our distribution centers and stores depending on availability of particular items. We operate in North America, Europe, and Asia Pacific, representing our operating segments. We aggregate these operating segments into one reportable segment based upon their shared customer base and similar economic characteristics.

Basis of Presentation

The accompanying interim Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of the results expected for the year.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in our 2023 Annual Report on Form 10-K.

There were no significant changes to the policies disclosed in Note 1, Summary of Significant Accounting Policies of our 2023 Annual Report on Form 10-K.

Recent Accounting Pronouncements

Other than the pronouncements disclosed in our 2023 Annual Report on Form 10-K, recently issued accounting pronouncements did not, or are not believed by management to, have a material effect on our present or future consolidated financial statements.

2. Revenue

The table below presents sales disaggregated by sales channel, as well as licensing revenue earned from our various licensed arrangements. Sales are attributable to the channel in which the sales transaction is initiated.

	*Thirteen weeks ended*				*Twenty-six weeks ended*
	*August 3,*		*July 29,*		*August 3,*		*July 29,*
($ in millions)	*2024*		*2023*		*2024*		*2023*
Sales by Channel
Stores	$	1,594	$	1,572	$	3,148	$	3,185
Direct-to-customers		302		289		622		603
Total sales		1,896		1,861		3,770		3,788
Licensing revenue		4		3		9		7
Total revenue	$	1,900	$	1,864	$	3,779	$	3,795

Second Quarter 2024 Form 10-Q Page 6

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2. Revenue (continued)

Revenue is attributed to the country in which the transaction is fulfilled, and revenue by geographic area is presented in the following table.

	*Thirteen weeks ended*				*Twenty-six weeks ended*
	*August 3,*		*July 29,*		*August 3,*		*July 29,*
($ in millions)	*2024*		*2023*		*2024*		*2023*
Revenue by Geography
United States	$	1,225	$	1,177	$	2,497	$	2,464
International		675		687		1,282		1,331
Total revenue	$	1,900	$	1,864	$	3,779	$	3,795

Sales by banner and operating segment are presented in the following table.

	*Thirteen weeks ended*				*Twenty-six weeks ended*
	*August 3,*		*July 29,*		*August 3,*		*July 29,*
($ in millions)	*2024*		*2023*		*2024*		*2023*
Foot Locker	$	754	$	704	$	1,513	$	1,448
Champs Sports		268		293		535		621
Kids Foot Locker		154		146		337		313
WSS		155		145		315		295
Other		1		—		1		—
North America		1,332		1,288		2,701		2,677
Foot Locker⁽¹⁾		445		416		839		795
Sidestep		—		12		—		26
EMEA		445		428		839		821
Foot Locker		87		102		159		200
atmos		32		43		71		90
Asia Pacific		119		145		230		290
Total sales	$	1,896	$	1,861	$	3,770	$	3,788

⁽¹⁾	Includes sales from 8 and 14 Kids Foot Locker stores operating in Europe for August 3, 2024 and July 29, 2023, respectively.

Contract Liabilities

We sell gift cards which do not have expiration dates. Revenue from gift card sales is recorded when the gift cards are redeemed by customers. Breakage income is recognized as revenue in proportion to the pattern of rights exercised by the customer. The table below presents the activity of our gift card liability balance.

	*August 3,*			*July 29,*
($ in millions)	*2024*			*2023*
Gift card liability at beginning of year	$	29		$	36
Redemptions		(80	)		(138	)
Breakage recognized in sales		(2	)		(9	)
Activations		76			133
Gift card liability	$	23		$	22

We elected not to disclose the information about remaining performance obligations since the amount of gift cards redeemed after 12 months is not significant.

Second Quarter 2024 Form 10-Q Page 7

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. Segment Information

Foot Locker, Inc. operates one reportable segment. Division profit reflects income before income taxes, impairment and other, corporate expense, other (expense) income, net, and net interest expense.

	*Thirteen weeks ended*						*Twenty-six weeks ended*
	*August 3,*			*July 29,*			*August 3,*			*July 29,*
($ in millions)	*2024*			*2023*			*2024*			*2023*
Division profit	$	17		$	21		$	60		$	125
Less: Impairment and other⁽¹⁾		9			14			23			53
Less: Corporate expense⁽²⁾		17			6			28			10
(Loss) income from operations		(9	)		1			9			62
Interest expense, net		(3	)		(4	)		(4	)		(5	)
Other (expense) income, net ⁽³⁾		(2	)		—			(6	)		(3	)
(Loss) income before income taxes	$	(14	)	$	(3	)	$	(1	)	$	54

⁽¹⁾	See Note 4, Impairment and Other for further detail.
⁽²⁾	Corporate expense consists of unallocated selling, 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.
⁽³⁾	See Note 5, Other (Expense) Income, net for further detail.

4. Impairment and Other

	*Thirteen weeks ended*				*Twenty-six weeks ended*
	*August 3,*		*July 29,*		*August 3,*		*July 29,*
($ in millions)	*2024*		*2023*		*2024*		*2023*
Impairment of long-lived assets and right-of-use assets	$	9	$	3	$	16	$	21
Legal claims		—		—		7		—
Transformation consulting		—		7		—		26
Reorganization costs		—		3		—		5
Other		—		1		—		1
Total impairment and other	$	9	$	14	$	23	$	53

For the thirteen weeks ended August 3, 2024, we recorded $9 million of impairment of long-lived assets and right-of-use assets primarily related to our decision to exit underperforming operations in South Korea, Denmark, Norway, and Sweden. We will close all stores operating in those regions as we focus on improving the overall results of our international operations. For the twenty-six weeks ended August 3, 2024, we recorded an additional $7 million of impairment of long-lived assets and right-of-use assets related to our decision to no longer operate, and to sublease, an unprofitable store in Europe, and a $7 million loss accrual for legal claims.

5. Other (Expense) Income, net

	*Thirteen weeks ended*						*Twenty-six weeks ended*
	*August 3,*			*July 29,*			*August 3,*			*July 29,*
($ in millions)	*2024*			*2023*			*2024*			*2023*
Pension and postretirement net benefit expense, excluding service cost	$	(1	)	$	(2	)	$	(3	)	$	(4	)
Share of losses related to minority investments		—			—			(2	)		(1	)
Foot Locker Singapore and Malaysia divestiture		—			2			—			2
Other		(1	)		—			(1	)		—
Total other (expense) income, net	$	(2	)	$	—		$	(6	)	$	(3	)

Second Quarter 2024 Form 10-Q Page 8

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6. Cash, Cash Equivalents, and Restricted Cash

The table below provides a reconciliation of cash and cash equivalents, as reported on our Condensed Consolidated Balance Sheets, to cash, cash equivalents, and restricted cash, as reported on our Condensed Consolidated Statements of Cash Flows.

	*August 3,*		*July 29,*
($ in millions)	*2024*		*2023*
Cash and cash equivalents	$	291	$	180
Restricted cash included in other current assets		3		13
Restricted cash included in other non-current assets		28		32
Cash, cash equivalents, and restricted cash	$	322	$	225

Amounts included in restricted cash primarily relate to amounts held in escrow in connection with various leasing arrangements in Europe. The deposits held in insurance trusts to satisfy the requirement to collateralize part of the self-insured workers’ compensation and liability claims have been replaced by standby letters of credit during the second quarter of 2024.

7. Revolving Credit Facility

In the second quarter of 2024, we entered into an amendment to the credit agreement (as so amended, the “Amended Credit Agreement”), which governs our $600 million secured asset-based revolving credit facility. The amendment provides for, among other things, (i) an uncommitted “accordion” feature that allows us, subject to certain customary conditions, to increase the size of the revolving credit facility to up to $750 million in the aggregate, (ii) an extension of the maturity date from July 14, 2025 to June 20, 2029, and (iii) a change to the interest rates and commitment fees applicable to the loans and commitments, respectively, as described below. The amendment provides that the interest rate applicable to loans drawn under the credit facility will be equal to, at our option, either a base rate, determined by reference to the federal funds rate, plus a margin of 0.50% to 1.00% per annum, or a forward-looking term rate, determined by reference to Secured Overnight Financing Rate plus a margin of 1.50% to 2.00% per annum, in each case, depending on availability under the Amended Credit Agreement. In addition, we will pay a commitment fee from 0.25% to 0.375% per annum on the unused portion of the commitments under the Amended Credit Agreement. No events of default occurred during 2024.

Our obligations under the Amended Credit Agreement are secured by a first priority lien on certain assets, including inventory and accounts receivable, cash deposits, and certain insurance proceeds. We may use the Amended Credit Agreement to, among other things, support standby letters of credit in connection with insurance programs. We did not have any borrowings outstanding as of August 3, 2024 and July 29, 2023, and the letters of credit outstanding as of August 3, 2024 were not significant.

We paid fees of $4 million in connection with the amendment of our credit facility and such costs are amortized over the life of the extended facility. The unamortized balance at August 3, 2024 was $5 million, which included the unamortized costs of the prior agreement.

8. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss (“AOCL”), net of tax, is comprised of the following:

	*August 3,*			*July 29,*			*February 3,*
($ in millions)	*2024*			*2023*			*2024*
Foreign currency translation adjustments	$	(183	)	$	(155	)	$	(173	)
Hedge contracts		1			(5	)		(2	)
Unrecognized pension cost and postretirement benefit		(188	)		(237	)		(191	)
	$	(370	)	$	(397	)	$	(366	)

Second Quarter 2024 Form 10-Q Page 9

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8. Accumulated Other Comprehensive Loss (continued)

The changes in AOCL for the twenty-six weeks ended August 3, 2024 were as follows:

	*Foreign*						*Items Related*
	*Currency*						*to Pension and*
	*Translation*			*Hedge*			*Postretirement*
($ in millions)	*Adjustments*			*Contracts*			*Benefits*			*Total*
Balance as of February 3, 2024	$	(173	)	$	(2	)	$	(191	)	$	(366	)

OCI before reclassification		(10	)		5			—			(5	)
Reclassification of hedges, net of tax		—			(2	)		—			(2	)
Amortization of pension actuarial loss, net of tax		—			—			3			3
Other comprehensive (loss) income		(10	)		3			3			(4	)
Balance as of August 3, 2024	$	(183	)	$	1		$	(188	)	$	(370	)

Reclassifications from AOCL for the twenty-six weeks ended August 3, 2024 were as follows:

($ in millions)
Reclassification of hedge loss:
Cross-currency swap	$	(2	)
Income tax		—
Reclassification of hedges, net of tax	$	(2	)

Amortization of actuarial loss:
Pension benefits	$	4
Income tax		(1	)
Amortization of actuarial loss, net of tax	$	3

9. Fair Value Measurements

Our financial assets and liabilities are recorded at fair value, using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

($ in millions)	*As of August 3, 2024*						*As of July 29, 2023*
	*Level 1*		*Level 2*		*Level 3*		*Level 1*		*Level 2*		*Level 3*
Assets
Available-for-sale security	$	—	$	6	$	—	$	—	$	6	$	—
Foreign exchange forward contracts		—		1		—		—		—		—
Cross-currency swap contract		—		12		—		—		2		—
Total assets	$	—