Foot Locker Missteps

Foot Locker (FL) announced Q4 results and let everyone know they officially had a bad year. The Company reported net income of $87 million, or $0.56 per share, this year as compared with net income of $113 million, or $0.72 per share, last year. Income from continuing operations was $86 million, or $0.55 per share, this year as compared with $110 million, or $0.70 per share, last year.

Q4 sales reflected a very challenging external environment, as overall consumer confidence weakened and retail sales, in general, softened, According to Matthew D. Serra, Foot Locker, Inc.'s Chairman and CEO. He then proceeded to explain that they discounted heavily and blew out a lot of inventory.

You can tell that the boss and his staff are conflicted as to how to manage the financial future. Not only are they light on information about future marketing intentions of any description the press release lays out this comment attributable to Matthew Serra: "Given our solid financial position at the end of 2007 and confidence in the ability of our businesses to sustain positive cash flow generation, as we have previously announced, our Board of Directors voted last month to increase our common stock dividend for 2008 by 20 percent. We will continue to evaluate all opportunities to enhance shareholder value, balanced prudently against maintaining a strong financial structure."

Freudian slip of the tongue. Somehow he is disconnecting shareholder value from strong financial structure. The two are intertwined and management is in an either or conundrum. It makes the recent dividend increase look like a bribe. The stock has drifted down for the past month and the dividend yield is well over 5%. The red light is flashing. Something needs servicing and repair.