Accounting ISU

Name: ​Zachary Martella

Teacher: ​Mr. Rossit
Course Code: ​BAT 4M1
Date: ​Friday, November 6, 2020
Foot Locker, Inc. Operates as a worldwide store of athletically-inspired footwear and attire. The

corporation operates through segments: Athletic Stores and Direct-to-Customers. Their stores

include Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, and Footaction. Foot

Locker is a leading global athletic shoes and clothing retailer. Its stores provide trendy

athletically stimulated overall performance merchandise manufactured by athletic

manufacturers. Its product categories include athletic shoes and clothing, and sporting life

inspired add-ons. Foot Locker was based in 1989 and is located in New York.

Part A:

In 1963, the Kinney Shoe Corporation was purchased by the F.W. Woolworth Company and

operated it as a subsidiary. In the Nineteen Sixties, the Kinney Shoe Corporation branched into

two different shoe shops, including Stylco in 1967 and Susie Casuals in 1968. In the Nineteen

Seventies, they continued to branch out other shoe stores, and on September 12, 1974, Foot

Locker was introduced.

Woolworth also differentiated its portfolio of expertise stores in the Nineteen Eighties, along with

Afterthoughts, Northern Reflections, Rx Place, and Champs Sports. By 1989, the corporation

turned into pursuing a competitive strategy of more than one strong format, targeting the

enclosed shopping malls. The idea was that if a specific idea fails at a given mall, the business

enterprise might want to update it with an exceptional idea quickly. The enterprise aimed for ten

shops in every one of the USA's fundamental shopping malls. However, this never worked

because Woolworth was incapable of developing that many store formats.

In 1988, the F.W. Woolworth Company included a separate organization referred to as the

Woolworth Corporation in New York. The Woolworth Corporation was accountable for the Foot

Locker shops' operations, a few of the other specialty chains operated via Woolworth's. One of
its first movements was acquiring Champs Sports and rename itself the Woolworth Athletic

Group.

During the Eighties and Nineties, the F.W. Woolworth Company's flagship department chain fell

into decline, eventually culminating in the closure of the last shops working under Woolworth's

within the United States in 1997. Deciding to preserve aggressive expansion into the athletic

business within the following years, the company acquired Eastbay in 1997, which became the

biggest athletic catalog store within the United States and subsequent purchases of nearby

storefront shops such as Sporting Goods in 1997 and The Athletic Fitters in 1998. The

Woolworth Corporation remained the parent corporation of Foot Locker, and in 1998 it modified

its name to "Venator Group, Inc." By the Nineteen Nineties, Foot Locker was responsible for 70

percent of Kinney Shoe Corp. Sales, while the shoe store Kinney turned into decline. Venator

announced the closing of the last Kinney Shoe and Footquarters stores on September sixteen,

1998.

On November 2, 2001, Venator changed its name to Foot Locker, Inc, after the development of

the "Foot Locker" logo had brought more success to Woolworth/Venator. Foot Locker

announced that its quarterly earnings rose 19 percent on November 19, 2004, using stronger

sales.

Foot Locker received the Footaction USA logo in 2004 and approximately 350 shops from

Footstar for $350 million. Foot Locker Inc. Announced that it agreed to shop for about 350

Footaction stores from bankrupt Footstar Inc. For $160 million on April 14, 2004, to enlarge in

urban regions.
Foot Locker joined with schoolPAX in 2007 to launch the Foot Locker School Rewards Program,

designed to offer charitable donations to colleges by giving custom-coded keytag or college

code. Foot Locker also joined Do Something in 2011 for the Foot Locker Scholar Athletes

software, honoring high excellence college athletes.

Foot Locker celebrated their 100th anniversary on June 26, 2012, and marked this day by

ringing the Closing Bell on the buy and sell day. This celebration reflects the F. W. Woolworth

Company, whose name changed to Foot Locker.

Part B:

Mr. Richard A. Johnson, additionally called Dick, is the Chief Executive Officer at Foot Locker,

Inc. since December 1, 2014, and served as President from December 1, 2014, to August 2020.

Mr. Johnson acquired a Bachelor of Arts diploma in Business Administration and Accountancy

from the University of Wisconsin, Eau Claire. From 1990 to 1993, Mr. Johnson started his career

as a Transportation Economics Manager at Graebel Van Lines, Inc. He also worked for

Electronic Data Systems as a Systems Engineer early in his career. Mr. Johnson serves on the

board of administrators of the Retail Industry Leaders Association and The Footwear

Distributors and Retailers of America. A CEO is responsible for the business's overall operation,

which usually involves governing company standards and comprehensive growth plans. The

president is tasked with providing robust management for the company via running with the

board and different executives to establish quick and long-term goals, objectives, and

strategies.

Ms. Lauren B. Peters is the Chief Financial officer and Executive Vice President at Foot Locker,

Inc. Before Foot Locker, she worked for diverse outlets in a financial function after starting her
public accounting career. From September 1998 to January 2000, Ms. Peters served as Vice

President and Controller of the Registrant's Financial Services Center, and from March 1997 to

August 1998, Ms. Peters served as Assistant Controller of the Registrant's Financial Services

Center. She turned into Audit Manager of Arthur Andersen & Company. She has been a

Director of La-Z-Boy Incorporated since August 24, 2016. Ms. Peters serves as a Director of

Carbon 38, Inc. A CFO is responsible for managing, organizing, and tracking all the financial

actions of the business. The executive vice president is one up of the senior vice president and

has the power to make the majority of the decisions.

Ms. Giovanna Cipriano is the Chief Accounting Officer and Senior Vice President of Foot

Locker, Inc. since May 2009. Ms. Cipriano holds a BS degree in accounting from St. John's

University and is a Certified Public Accountant in New York. In 1996 Ms. Cipriano joined Foot

Locker, Inc. having begun her career with KPMG. She was promoted to Director of External

Reporting in 1998 and, in 2002, promoted to Divisional Vice President, Financial Controller.

Chief accounting officers are in charge of the business's entire accounting department and is

responsible for the accounting operations and financial reporting. Senior vice presidents have

an executive role in organizing the business departments and do most of the reporting to the

company’s CEO.

Ms. Sheilagh M. Clarke is the Senior Vice President, General Counsel, and Secretary of Foot

Locker, Inc since June 1, 2014. She is a graduate of Monmouth University and Seton Hall Law

School. Ms. Clarke joined Foot Locker in 1988, and because that time, has held several

positions inside the organization's Legal Department. The general counsel manages all the legal

matters of the business. Secretaries are in charge of starting board and committee meetings

and acting as advisers to the company directors.

Ms. Elizabeth S. Norberg is the Senior Vice President and Chief Human Resources Officer at

Foot Locker, Inc. since September 17, 2018. Ms. Norberg is a graduate of Colorado State

University and holds a Bachelor of Science in Business Management. She joined Foot Locker

from Loews Hotels & Co., where she served as Executive Vice President and Chief Human

Resources Officer.

Mr. Bryon W. Milburn is the Senior Vice President and General Manager of Champ Sports -

North America at Foot Locker, Inc. and served as its Chief Executive officer and President of

Champ Sports. The general manager's main task is to manage the revenues and the costs of

the business.

Mr. William Scott Martin serves as Executive Vice President and Chief Executive Officer of Asia

Pacific of Foot Locker, Inc. Mr. Martin holds a Law Degree from the University of Toledo and a

BS. In Accounting from Ohio State University. He formerly held senior approach and kept

improvement roles at different massive retailers, including Starbucks Coffee, Home Depot, and

Sears Holdings. Mr. Martin previously served as Vice President, Store Development of Asia

Pacific with Gap Inc. From June 2014 to June 2016.

Mr. Vijay Talwar serves as a Member of the Advisory Board at Authorized Luxury Group, Inc.

Mr. Talwar holds an MBA. From the University of Chicago, a Master of Accountancy from Miami

University, and a BA. In Accountancy from the University of Findlay. From April 2002 to

December 2003, he served as a manager of the worldwide strategic making plans institution at

Nike. Before Nike, Mr. Talwar was a Consultant at Bain & Company, a management consulting

firm; a special initiatives Manager and Senior Internal Auditor at the Kellogg Company, a

Producer of cereal and comfort meals; and a Senior Tax Consultant and Audit Assistant at

Deloitte & Touche, an accounting firm.

Mr. Andrew I. Gray is the Executive Vice President and Chief Commercial Officer at Foot

Locker, Inc. since July 2020 and served as its Chief Merchandising Officer at Foot Locker, Inc.

since October 2017. A chief commercial officer is in charge of marketing, sales, product

development.

Part C:

Footlocker has had many events that affect its business recently. Along with COVID-19, here

are the ways in which Footlocker, as well as other businesses, are being affected during this

time.

The first way is through online shopping. Online shopping has vastly improved over this

pandemic and has been the source of income for many companies. Many people have

preferred to shop online for Footlocker than to shop in person for health and safety reasons.

Online shopping has been a great way for many businesses to keep on running and making

money. Many articles even suggest that after being in this pandemic, many people have learned

through experience that they actually prefer online shopping, and perhaps it may be the new

way of shopping for most people.

The second way is fewer people coming to stores. Although online shopping has recently had

its way of success, many businesses know that they would be making more money and more

sales if more customers had actually come to the stores. Many companies know that their

business is losing sales because many people purchase the wrong sizes. After all, they cannot

try it before buying it. Many people get drawn away from shopping online because of that. With

stores having a limit of people allowed in the store, it's just that much more difficult to make

sales.
The third way is laying off employees/staff. This technically doesn't affect the business in terms

of profit or loss as all things are balanced, but this loses their employee's loyalty towards the

business. Losing employees is never a good thing, and having to force them out isn't a good

thing either. Most, if not all, employees during this time will not return to their previous job, even

if given the opportunity, because by then, they would've hopefully found another job to make

money.

The fourth way is the stores closing. With the current stage of COVID-19 that we are in, many, if

not all, stores across the GTA are allowed to open during a specific period of time. However,

previously that was not the case, and many companies lost a lot of money. Luckily Footlocker is

a massive company and was able to financially recover from this, but it still must've caused a

huge dent in the bank account.

The fifth way is new store releases. Despite Footlocker being incapable of making as many

sales as it did before COVID-19, it's still able to keep a relatively good amount of sales through

new releases of footwear and clothing apparel. With Footlocker selling many big brand

products, such as ADIDAS, CALVIN KLEIN, CHAMPION, COACH, CONVERSE, FILA,

JORDAN, LACOSTE, NEW BALANCE, NIKE, PUMA, REEBOK, THE NORTH FACE,

TIMBERLAND, TOMMY HILFIGER, UGG, UMBRO, UNDER ARMOUR, and VANS, they tend to

make a lot of sales and draw a lot of interest whenever these companies release something

new.

The sixth and last way is through discounts. With Black Friday looking to take companies out of

debt and Christmas shopping coming around the corner, Footlocker and many other companies

are looking forward to making sales during this period. Although discounts activate a lot more

sales to happen, the companies profits are not as high as you expect because of the discount
on the product. However, it's still seen as a positive effect on the business because they can

clear out products that will not be worth as much within time.

Part D:

Liquidity Ratio

The current ratio is a widely used measure of the company’s liquidity and short-term

debt-paying ability. The ratio is calculated by dividing current assets by current liabilities. Foot

Locker's current ratio for the quarter that ended in Jul. 2020 was 1.69. This means for every

dollar of current liabilities, Foot locker has $1.69 of current assets, which is a good thing.

The current ratio is only one measure of liquidity. It does not consider what the current assets

are composed of. The acid-test ratio differs from the current ratio by excluding assets that are

less liquid, which takes longer to be converted into cash. The acid-test ratio is calculated by

dividing the sum of cash, short-term investments, and receivables by current liabilities. Foot
Locker's quick ratio for the quarter that ended in Jul. 2020 was 0.98. This means for every dollar

of current liabilities, Foot locker has $0.98 of highly liquid current assets, this is not a good thing

because that means foot locker may not be able to pay its current liabilities.

The receivables turnover ratio is used to assess the liquidity of the receivables. It measures the

number of times that receivables are collected during this period. The receivables turnover is

calculated by dividing net credit sales by the average gross accounts receivable. Foot locker’s

receivables turnover is 79.26.

Inventory turnover measures the average number of times that the inventory is sold during the

period. It’s purpose is to measure the liquidity of the inventory. The inventory turnover is

calculated by dividing the cost of goods sold by the average inventory. Foot Locker Inc inventory

turnover ratio sequentially increased to 4.09 in the second quarter 2020 (above company

average) which is good.

The operating cycle measures the average time it takes to purchase inventory, sell it on

account, and collect the cash from customers. It is calculated by adding the days sales in

inventory and the collection period together. Foot Locker's latest twelve months cash conversion

cycle is 59 days.

Solvency Ratio

Debt to total assets measures the percentage of the total assets that is provided by creditors. It

is calculated by dividing total liabilities by total assets. Foot locker’s debt to total assets is at

0.39, which is good.

The interest coverage ratio gives an indication of the company’s ability to make its interest

payments as they come due. It is calculated by dividing profit before interest expense and

income tax expense by interest expense. Foot locker’s interest coverage is at 26.75, which is

good.
One indication of a company’s solvency and its ability to expand operations, repay debt, or pay

dividends is the same amount of excess cash it generates after paying to maintain its current

productive capacity. This amount is referred to as free cash flow. Foot locker’s free cash flow is

$551,000.

Profitability ratio

The gross profit margin is determined by dividing gross profit by net sales. This ratio indicates

the relative relationship between net sales and cost of goods sold. During the past 13 years, the

highest Gross Margin % of Foot Locker was 33.94%, the lowest was 28.75%, and the median

was 32.37%.
Profit margin is a measure of the percentage of each dollar of sales that results in profit. It is

calculated by dividing profit by net sales. Foot Locker net profit margin as of July 31, 2020 is

2.88%, which is not good.

Asset turnover measures how efficiently a company uses it’s assets to generate sales. It’s

determined by dividing net sales by average total assets. Foot locker’s asset turnover is at 1.34,

which is not good.

Return on assets is an overall measure of the profitability return on assets. The ratio is

calculated by dividing profit by average total assets. Foot locker’s return on assets is 2.88%,

which is not good.

Return on equity is a popular measure of profitability. This ratio shows how many dollars of profit

were earned for each dollar invested by shareholders. It is calculated by dividing profit by the

average total shareholder’s equity. Foot locker’s return on equity of 2020 was 7.63%, which is

not good. During the past 13 years, Foot Locker's highest ROE % was 25.23%, the lowest was

8.00%(now 7.63%), and the median was 18.71%.

Earnings per share is a measure of the profit earned on each common share. Earnings per

share is calculated by dividing the profit available to common shareholders by the weighted

average number of common shares. Foot locker’s earning per share is $4.50, which is good.

The price-earnings ratio is an often-quoted measure of the ratio of the market price of each

common share to the earnings per share. Its calculated by dividing the market price per share

by earnings per share. Foot Locker's P/E ratio for today is 20.06. During the past 13 years, Foot

Locker's highest P/E Ratio was 50.20, the lowest was 4.42, and the median was 15.43.

The payout ratio measures the percentage of profit distributed as cash dividends. It is calculated

by dividing cash dividends by profit. Foot locker’s payout ratio is 12.17%, which is good.

Part E:
Liquidity ratio

Dick's Sporting Goods's current ratio for the quarter that ended in Jul. 2020 was 1.35. During the

past 13 years, Dick's Sporting Goods's highest Current Ratio was 2.07. Compared to Foot

lockers 1.69, foot locker is doing better.

During the past 13 years, Dick's Sporting Goods's highest Quick Ratio was 0.92, the lowest was

0.10, and the median was 0.25.Compared to foot lockers 0.98, foot locker is doing better.
Dick’s Sporting Goods’ receivables turnover 148.48. Compared to foot locker’s 79.26, Dick’s

Sporting Goods is doing better.

Dick's Sporting Goods' Inventory Turnover for the quarter that ended in Jul. 2020 was 0.89.

Compared to foot locker’s. Compared to foot locker’s 4.09, foot locker is doing better.

It takes Dick's as many as nearly 119 days to sell the entire inventory. Compared to foot locker’s

59 days, foot locker is doing better.

Solvency ratio
Dicks Sporting Goods’ debt to total assets is 0.39. Compared to foot lockers 0.39, they’re doing

the same.

Dicks Sporting Goods’ interest coverage is 26.66. Compared to foot locker’s 26.75, foot locker is

doing better.
DICK'S Sporting Goods free cash flow for the quarter ending July 31, 2020 was $782.45, a

year-over-year. Compared to foot locker’s $551,000, DICK'S Sporting Goods is doing better.

Profitability ratio

Therefore, Dick's Sporting Goods' Gross Margin % for the quarter that ended in Jul. 2020 was

34.53%. Compared to foot locker’s 28.75%, Dick's Sporting Goods is doing better.

DICK'S Sporting Goods net profit margin as of July 31, 2020 is 3.03%. Compared to foot

locker’s 2.88%, DICK'S Sporting Goods is doing better.

Dick's Sporting Goods' Asset Turnover for the quarter that ended in Jul. 2020 was 0.36.

Compared to foot locker’s 1.34, foot locker is doing better.

Dick's Sporting Goods' return of assets is 3.62%. Compared to foot locker’s 2.88%, Dick's

Sporting Goods is doing better.

Dick's Sporting Goods' return of equity is 14.88%. Compared to foot locker’s 7.63%, Dick's

Sporting Goods is doing better .

DICK'S Sporting Goods EPS for the quarter ending July 31, 2020 was $3.12, a 147.62%

increase year-over-year. Compared to foot locker’s $4.50, foot locker is doing better.

DICK'S Sporting Goods PE ratio as of October 30, 2020 is 14.75. Compared to foot locker’s

20.06, foot locker is doing better.

DICK'S Sporting Goods's payout ratio is modest, at just 33% of profit. Compared to foot locker’s

12.17%, Dick's Sporting Goods is doing better.

Part F:

An easy way of determining foot locker financial position is to check back at the liquidity,

solvency, and profitability ratios to see if they were good and compare them to the competitor's

ratios we had mentioned earlier. Suppose we recall which ratio's of Foot Lockers were good. In

that case, we'll know that Foot Locker's current ratio at 1.69, inventory turnover at 4.09,

operating cycle at 59 days, debt to total assets at 0.39, interest coverage at 26.75, earning per

share at $4.50, the price-earnings ratio at 20.06, and the payout ratio at 12.17% are all good

stats when it comes to ratios. However, let's look back at the stats that are not good. We'll know

that Foot locker's quick ratio at 0.98, receivables turnover at 79.26, free cash flow at $551,000,
gross profit margin at 28.75%, net profit margin at 2.88%, asset turnover at 1.34, return on

assets at 2.88%, and the return on equity at 7.63% are not good stats or are not good enough

compared to their competitor. As a whole, the liquidity ratio has 3/5 good ratios, the solvency

ratio has 2/3 good ratios, and the profitability ratio has 3/8 good ratios. When we look at that

stat, we realize that the business is currently in a good financial position, but it might not always

be this good for so long due to the profitability ratio.

It's also good to know whether the company is worth investing in when looking at its financial

statement. Despite Footlocker having a good debt to equity level, meaning they can pay off their

debts, Foot locker's share price has been volatile over the past 3 months, and their dividend

payments have been volatile in the past 10 years. Those two negative stats are really important

to look at when deciding on a long-term investment, so if you were to ask me if I wanted to

invest, I would say no.

Although Footlocker's future does not look at good as perhaps they want, they're currently still a

company that looks financially stable. Their short term assets exceed their short term liabilities,

as well as their long term assets exceed their long term liabilities. Their debt at $121M to their

equity at $2.4B puts them at a debt to equity ratio of 5.0%, which is very high. The liquidity ratio,

which measures a company's short-term ability to pay its maturing obligations and meet

unexpected cash needs, is at 3/5 in terms of good ratios. The solvency ratio, which is the

measure of a company's ability to survive over a long time, is at 2/3 in terms of good ratios,

which is still pretty good. Overall, although their profitability and risks in the stock market are not

as good as they would like, they're still a very financially stable company and have a good

financial position.
Foot Locker - CompaniesHistory.com. ​https://www.companieshistory.com/foot-locker/
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