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Module 10-Foot Locker, Inc.

Module 10-Foot Locker, Inc. Taylor Blaney. Sporting Goods Stores Industry. Overview Sporting goods stores sell sporting equipment typically from outside goods manufacturers Goods in the industry range from camping equipment to basketball hoops to shoes

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Module 10-Foot Locker, Inc.

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  1. Module 10-Foot Locker, Inc. Taylor Blaney

  2. Sporting Goods Stores Industry • Overview • Sporting goods stores sell sporting equipment typically from outside goods manufacturers • Goods in the industry range from camping equipment to basketball hoops to shoes • Annual Revenue for the sporting goods industry is over $42 billion and annual growth is steady around 2.5%-3.5% however the number of companies is slowly declining

  3. Foot Locker Overview • Global retailer of athletic shoes and apparel • Located primarily in North America, Europe, Australia, and New Zealand • Largest retailer of athletic shoes in the U.S. • Nearly $6.2 billion in sales in 2012 (73% within U.S.) • Develops few products, mostly supplied by a few top-end product manufacturers • Operate in two ways: • Athletic Stores • Direct to Customers

  4. Foot Locker in the Industry • Market share-11.2% • No threat of acquisition • Reasons for growth • Recent consumer confidence has lead to growth in shoe sales • Exclusive contracts with suppliers • Growing Online Retail • Adolescent Demographic • Largest buyer of basketball shoes in U.S.

  5. Included in Balance Sheet Accounts • To gain further knowledge on how the company operates specific balance sheet accounts are examined to understand their makeup • Information gained from footnotes and other areas can lead to changes in NEA and EPAT which will change the value of the firm through forecastig

  6. Balance Sheet

  7. Current Assets

  8. Property Plant and Equipment

  9. Footlocker Deferred Taxes • GAAP allows combining deferred taxes with other accounts

  10. Deferred Taxes

  11. Pension and Retirement Benefits

  12. Goodwill and Other Assets

  13. Accrued and Other Liabilities

  14. Adjustment Balance Sheet • Certain accounts include deferred tax amounts and pension benefit amounts within their totals • These accounts must be separated and examined to understand if NEA or EPAT should be changed to account for this method of accounting

  15. Income Statement • Significant information can be gathered from the notes on the income statement balances • Specifically for Foot Locker the sales numbers by stores is significant as is the inventory makeup

  16. Income Statement

  17. Make-up of sales and Impairment

  18. Income Tax Expense

  19. Tax % number

  20. Adjusted Income Statement

  21. Conclusions • Accounts related to sales will most likely be broken apart to forecast online and in-person sales • Inventory accounting will be compared among firms in the industry to understand if Foot Locker’s method of accounting is significantly different therefore valuing the firm differently • Assumed tax rate has been on track with what the firms actual rate has been

  22. Conclusions • Adjustments to the balance sheet will change how the firm is valued and where certain accounts are held in financing vs. operations • No breakout of cost of sales occurred which is a major cost driver • Large operating lease costs of $2 billion are not included but are good to note for the firms obligations

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