This summary is based on the first quarter fiscal 2008 earnings call conducted by Foot Locker, Inc. (FL: chart) on May 23, 2008.

Management:

Sr. VP, CIO & IR: Peter Brown
President & CEO: Matthew Serra
Sr. VP & CFO: Robert McHugh

Key Investors Issues

- EPS were 2 cents a share compared to 11 cents a share last year.
- Profit fell to $3 million from $17 million in the year-ago period.
- Revenue fell to $1.31 billion from $1.32 billion last year.

First Quarter Highlights

At quarter-end, financial position was strong with over $500 million of cash and short-term investments and just $219 million of balance sheet debt.

- Subsequent to quarter-end, the company completed negotiations with bank group on a new three year revolving credit facility for $175 million which includes a provision that will allow increasing the size of the facility by $100 million for a total of $275 million under certain circumstances.
- Simultaneous with the closing of this facility, the company repaid the remaining $88 million balance of term loan. Upon completion of this transaction, long-term debt was comprised of $129 million of 8.5% debentures due in 2022 and total cash position and availability under new revolving credit facility was nearly $600 million. Therefore liquidity position is strong and the company has more than adequate financial flexibility to execute business strategy.

Comparable stores sales of major divisions were as follows:

- Combined US store operations decreased low single-digits with each business’ results closely aligned to this range.
- Footlocker.com sales were positive increasing low single-digits.
International comparable store sales declined mid single-digits with Europe down high single-digits.
- Foot Locker Canada up low single-digits.
- Foot Locker Asia Pacific up high single-digits.
- By month, comparable store sales increased low single-digits in February, declined mid single-digits in March, and decreased low single-digits in April.

Gross margin rate increased by 60 basis points from last year reflecting a 130 basis point improvement in merchandise margin rate and a 70 basis point deleveraging of buying and occupancy rate.

- While the external environment remains challenging and negatively impacted comparable store sales, the company offset the impact of the sales loss on profits through a higher margin rate. Merchandise margin rates are clearly benefiting this year from two key factors that have allowed to better controlling markdown rates. Inventory level at the beginning of the year was better positioned than it was at the same time last year and the company has taken a more conservative posture in planning and purchasing new merchandise receipts than in the recent past.
- While first quarter tenancy rate was higher then last year on a constant currency basis, these costs were favorable to plan and in line with the first quarter of last year.

SG&A expenses increased $9 million versus last year.

- On a constant currency basis first quarter SG&A expenses decreased by $1 million.
- Depreciation expense declined by $11 million versus the first quarter of last year. The decrease in depreciation expense stemmed primarily from the asset impairment write-downs last year in accordance with FAS 144. This was partially offset by increased depreciation expense as a result of stronger foreign currency rates. Net interest expense was $1 million, higher then last year reflecting lower interest rates on short-term investments.
- The company recorded a non-cash charge associated with a note receivable due from the purchaser of the Northern Group, a business in Canada that sold in 2001. This impairment charge totaled $15 million or 10 cents per share.

The store closing expenses recorded were in line with a program initiated last year primarily to accelerate the closing of cash flow negative stores.

Negotiated settlements with landlords associated with exiting 15 stores prior to lease expiration totaled $4 million pre-tax, or 2 cents per share.

- Income tax provision of $11 million reflects two key factors: the $15 million impairment charge is classified as a capital loss for which the company may not receive a tax benefit unless an offsetting capital gain is realized. Additionally the company recorded $1 million of incremental income tax expense as a result of an adjustment to actual amounts due in Europe. Therefore nominal income tax rate on the first quarter net income, before the impairment charge and excluding this European adjustment was closely aligned to forecasted rate of 35.5%.

- At the end of the first quarter cash position net of debt was $283 million, $100 million favorable to the end of the same period last year and also higher then the balance at the start of the year.
- Total cash and short-term investments totaled $502 million while long-term debt stood at $219 million.
- Merchandise inventory position of $1.4 billion at the end of the first quarter was $99 million or 6.6% lower then at the same time last year.
- On a constant currency basis inventory was 9% lower then last year. This reduction is in line with a strategic initiative designed to reduce inventory per store and increase inventory turnover.

First quarter sales trend was uneven with comparable store sales results flattish and in line with plan in both February and April, results fell short in March and impacted negatively by both unseasonable weather and an early Easter selling season.

Merchandise margin rate was favorable to plan and better then last year.