INVESTOR MEETING / MARCH 9, 2010 1
Disclosure Regarding Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. All statements, other than statements of historical facts, which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, such things as future capital expenditures, expansion, strategic plans, dividend payments, stock repurchases, growth of the Company s business and operations, including future cash flows, revenues and earnings, and other such matters are forward-looking statements. These forwardlooking statements are based on many assumptions and factors detailed in the Company s filings with the Securities and Exchange Commission, including the effects of currency fluctuations, customer demand, fashion trends, competitive market forces, uncertainties related to the effect of competitive products and pricing, customer acceptance of the Company s merchandise mix and retail locations, the Company s reliance on a few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor), pandemics and similar major health concerns, unseasonable weather, further deterioration of global financial markets, economic conditions worldwide, further deterioration of business and economic conditions, any changes in business, political and economic conditions due to the threat of future terrorist activities in the United States or in other parts of the world and related U.S. military action overseas, the ability of the Company to execute its business plans effectively with regard to each of its business units, and risks associated with foreign global sourcing, including political instability, changes in import regulations, and disruptions to transportation services and distribution. Any changes in such assumptions or factors could produce significantly different results. The Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise. 2
Agenda Corporate Vision / Strategies / Objectives Strategies / Actions Financial Review Questions & Answers Ken Hicks Ken Hicks Dick Johnson Ron Halls Bob McHugh Bob McHugh All 3
Presenters Ken Hicks Chairman of the Board, President and Chief Executive Officer Ron Halls President and Chief Executive Officer, Foot Locker, Inc. - International Dick Johnson President and Chief Executive Officer, Foot Locker U.S./Lady Foot Locker/Kids Foot Locker/Footaction Bob McHugh Executive Vice President, Chief Financial Officer 4
Competitive Strengths Global Market Leadership Brand Banner Recognition Breadth and Depth of Product Assortments Multiple Channels of Distribution Organizational Depth & Experience Financial Position 5
Opportunities Differentiate Brand Banners Further Enhance Footwear and Apparel Assortments Improve Operational Execution Accelerate Growth Initiatives Increase Productivity of Assets 6
Vision Statement Be the leading global retailer of athletically inspired shoes and apparel 7
Strategies 1. Be the Power Merchandiser of athletic shoes and apparel with clearly defined Brand Banners 2. Develop a compelling Apparel assortment 3. Make our stores and internet sites Exciting Places to shop and buy 4. Aggressively pursue Growth Opportunities 5. Increase the Productivity of all of our assets 6. Build on our Industry Leading Retail Team 8
Strategy 1. Be the Power Merchandiser of athletic shoes and apparel with clearly defined Brand Banners Actions: I. Broaden our Range of athletic shoes and apparel to Reach More Customers II. III. Strengthen our position with Leading Athletic Brands with strong partnerships Offer a broader range of Value IV. Develop powerful Marketing programs 9
Power Merchandiser 1. Be the Power Merchandiser of athletic shoes and apparel with clearly defined Brand Banners ATHLETIC CONNOISSEUR SNEAKER CENTRAL ACTIVE WOMEN THE PLACE FOR HER KIDS PLAY FOR SPORT WHERE KIDS COME FIRST STYLE ENTHUSIAST HEAD TO TOE SPORT INSPIRED STYLE ULTIMATE SPORTS FAN WHERE SPORT LIVES ELITE VARSITY STAR ATHLETE FIRST CHOICE FOR ATHLETES STYLE-CONSCIOUS SKATER LARGEST DECK SELECTION 10
Power Merchandiser I. Broaden our Reach HOME OF BASKETBALL HOME OF SNEAKERS 11
Power Merchandiser I. Broaden our Reach Engage active women Performance footwear, apparel, accessories Targeted marketing Expert customer service Performance Toning Lifestyle Value 12
Power Merchandiser I. Broaden our Reach Expand beyond urban offerings Provide value Expand beyond traditional Foot Locker adult styles Kid-friendly customer service 13
Power Merchandiser I. Broaden our Reach Service existing customer better Trendsetting head-to-toe product offerings Sports lifestyle marketing Fashion-right on street 14
Power Merchandiser I. Broaden our Reach Where sport lives Head-to-toe offerings Trend-right apparel is key to success Team marketing Amplify sport through apparel 15
Power Merchandiser I. Broaden our Reach Where athletes are Authentic elite performance product What the pros wear In your school colors up to 23 colors In elite athlete sizes Up to size 22 16
Power Merchandiser II. Strengthen Vendor Partnerships 17
Power Merchandiser III. Broaden Range of Value Projected Price Points LOW Foot Locker s Price Point Range HIGH Average Price Point Wal-Mart Total U.S. Athletic Foot Locker, Inc. Payless Market Specialty Sporting Goods Product exclusivity VALUE Design / Style Customer service Price 18
Power Merchandiser IV. Develop Powerful Marketing 19
Power Merchandiser IV. Develop Powerful Marketing 20
Strategy 2. Develop a compelling Apparel assortment Actions: I. Be a leader in Branded Athletic apparel in look and function II. III. Create a meaningful Private Label apparel business Strengthen our In-Store Merchandising of apparel 21
Compelling Apparel Assortment I. Leader in Branded Apparel Seek banner-relevant brands Be meaningful with vendor brands Build powerful brand presence Develop / Grow new brands 22
Compelling Apparel Assortment II. Meaningful Private Label Business Increase our apparel sales and enhance our brand image Banner differentiation Build pricing matrix between branded & private label Partnered brand development 23
Compelling Apparel Assortment III. Strong In-Store Merchandising Focus on powerful product displays 24
Compelling Apparel Assortment III. Strong In-Store Merchandising Focus on powerful product displays 25
Strategy 3. Make our stores and internet sites Exciting Places to shop and buy Actions: I. Capitalize on our strong customer service model II. Create a consistent, exciting shopping environment III. Connect our channels IV. Encourage new ideas 26
Exciting Places to Shop I. Capitalize on our Strong Customer Service Model 27
Exciting Places to Shop II. Create a Consistent, Exciting Shopping Environment BEFORE AFTER 28
Exciting Places to Shop II. Create a Consistent, Exciting Shopping Environment BEFORE AFTER 29
Exciting Places to Shop III. Connecting our Channels Brick-n-Mortar websites demand grew faster in 2009 than industry Site redesigns with current technology Integrated big event promotions Shared campaign themes and content between channels Social media sites connected Manage inventory across channels Footlocker.com Kidsfootlocker.com Ladyfootlocker.com Footaction.com Champssports.com Eastbay.com CCS.com Foot-locker.co.uk 30
Exciting Places to Shop III. Connecting our Channels ON-LINE MOBILE IN-STORE 31
Exciting Places to Shop IV. Encourage New Ideas The Place for New Ideas INCUBATE TEST DEVELOP New Brands New Strategies New Store Environments New Marketing Ideas New Operational Ideas 32
Strategy 4. Aggressively Pursue Growth Opportunities Actions: I. Expand our International position II. Build on our On-Line leadership III. Identify New Avenues for growth IV. Broaden our Reach for New Customers 33
Growth Opportunities I. Expand our International Position Current Pan European position 518 stores 34
Growth Opportunities I. Expand our International Position International growth Expand in existing Western European markets (+50% of potential store growth identified) Expand in Eastern Europe Pursue new markets (Asia, South & Central America) 35
Growth Opportunities II. Be the Leader in Athletic Shoes and Apparel On-line Our path to leadership Have the best selection Leverage our brick & mortar brands Coordinate merchandise assortments and marketing message Be relevant and exciting through technology Optimize stock locator program 36
Growth Opportunities II. Be the Leader in Athletic Shoes and Apparel On-line STORES magazine ranked Eastbay #1 Sporting Goods On-line Retailer and #27 overall BEFORE 37
Growth Opportunities II. Be the Leader in Athletic Shoes and Apparel On-line STORES magazine ranked Eastbay #1 Sporting Goods On-line Retailer and #27 overall AFTER 38
Growth Opportunities II. Be the Leader in Athletic Shoes and Apparel On-line BEFORE 39
Growth Opportunities II. Be the Leader in Athletic Shoes and Apparel On-line AFTER 40
Growth Opportunities II. Be the Leader in Athletic Shoes and Apparel On-line Foot Locker takes an early lead in Mobile Marketing Foot Locker mobile ranked #1 for speed and availability Four million mobile product views in 09 vs. 60,000 in 08 Launched mobile sites for Foot Locker, Champs Sports, Eastbay and CCS Foot Locker VIP Mobile launched in 2009 41
Growth Opportunities II. Be the Leader in Athletic Shoes and Apparel On-line 2010 on-line focus Cross channel integration Strengthen assortments in our existing sports Increase our position in the world's largest game Futbol / Soccer Continue mobile shopping development 42
Growth Opportunities III. New Avenues for Growth (100+ store potential) 43
Growth Opportunities III. New Avenues for Growth (100+ store potential) 44
Growth Opportunities III. New Avenues for Growth 45
Strategy 5. Increase the Productivity of all of our assets Actions: I. Rigorously manage our Expenses II. Improve our Inventory Turnover and Merchandise Flow III. Improve our Conversion Rate IV. Improve the Efficiency and Effectiveness of our operations 46
Increase Productivity I. Rigorously Manage our Expenses Focus on Flow-Through: Sales Profits Key Expense Initiatives Benchmark studies Rent concessions and store consolidations at renewal Labor scheduling tools E-procurement Profit improvement program 47
Increase Productivity II. Improve our Inventory Turnover and Merchandise Flow Although we have made some progress - 0.0% Inventory - 2005 to 2009 CAGR -1.0% Per Store Per Sq. Ft -2.0% Total -3.0% -4.0% -5.0% 3.50 3.00 We have further opportunity - Inventory Turnover + 2.50 2.00 2005 2009 2010 F 5-Year Objective 48
Increase Productivity II. Improve our Inventory Turnover and Merchandise Flow Merchandise flow initiatives Initial order size vs. replenishment Better store sizing by store Store clustering / Local assortments Manage product lifecycle 49
Increase Productivity III. Improve our Conversion Rate Convert higher percentage of store traffic into sales Critical Actions to improve 1. Service / Selling skills 2. Product availability / assortment 3. Customer focused size / fit opportunities 4. Brand image 5. Store environment 50
Increase Productivity IV. Improve the Efficiency and Effectiveness of our Operations Through Technology Development projects focus Store operations Merchandise systems Store labor scheduling E-Commerce Cross-channel integration 51
Strategy 6. Build on our Industry Leading Retail Team Actions: I. Attract, Develop and Retain the best people in retail II. Build on our Sales Oriented and Customer Focused culture III. Strengthen the Selling and Service Skills of our stores organization 52
Financial Objectives 2009 5-Year Objective Sales ($ billion) $4.9 Sales/Avg. Gross Sq. Ft. $333 EBIT Profit Rate* 2.6% Net Income Rate* 1.8% ROIC* 5.2% Inventory Turnover 2.2X $6.0 $400 8.0% 5.0% 10.0% 3.0X *Adjusted to exclude impairment, inventory write-down, restructuring and income tax charges. 53
Financial Objectives 5-Year 2009 Objective Key Initiatives Lower Markdowns Reduced Shrink Occupancy Leverage Gross Margin Rate* 27.7% 30%-31% Reduced Shrink SG&A Rate 22.6% 20%-21% Expense Reductions Depreciation Rate 2.3% 2.0% Focused CAPEX EBIT Profit Rate* 2.6% 8.0% Net Income Rate* 1.8% 5.0% Expense Reductions Expense Leverage Focused CAPEX *Adjusted to exclude impairment, inventory write-down, restructuring and income tax charges. 54
Capital Allocation Strategy Capital Structure Objective Maintain financial flexibility required to execute strategic plan Current Plan Requirements Capital expenditures (Increases annually over 5 year period) Average $140 million per year Average 60 new stores worldwide per year Fund shareholder dividends Pension contribution requirements 55
Capital Allocation Strategy Additional Shareholder Value Enhancement Opportunities Accelerate store growth globally Fund new / developing concepts Increase shareholder dividend Optimize capital structure Other growth opportunities 56
Summary Strategic Vision To be the leading global retailer of athletically inspired shoes and apparel Strategic Plan Doing what we do well---better and more efficiently Pursue new growth opportunities Financial Objectives Stretch Goals But Realistic and Achievable 57
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