By  on July 30, 2007

Foot Locker Inc. is shutting down its three-month-old Footquarters operation.

WWD has learned that the athletic footwear and apparel retailer has decided to scrap its valued-priced family footwear concept. According to a regulatory filing in May, there were 31 Footquarters locations in operation. Those stores are in the process of selling discounted inventory to clear the decks so the sites can be converted and reconfigured into either Foot Locker outlet or Champs Sports outlet nameplates.

Sources at Foot Locker said that those conversions are expected to take place next month. Other sources familiar with the changes said the shutdown of Footquarters is part of an overall restructuring of some of the retailer's operations.

A spokesman for Foot Locker said Friday that the change will be a "seamless transition" and may even be done by this week. "All the store associates will stay in place; they'll just be working under a different brand. The people in divisional management have been put into other positions within the company," he said.

These changes come at a time when the retailer is mulling a sale of the company, the second time it is considering the option within a year.

Apollo Management is said to be circulating around the retailer again, and financial sources said the private equity firm is eyeing a $28 a share bid for the company. A spokesman for Apollo declined comment, citing company policy.

Last year a slew of private equity firms were targeting Foot Locker as a leveraged buyout candidate because it is considered a consistent generator of cash flow, which is what LBO shops look for to help it pay down the debt incurred in the purchase. The buyout shops interested last year, aside from Apollo, were Thomas H. Lee Partners and Kohlberg, Kravis & Roberts.

The team at Apollo last year was led by Peter Copses, who heads up the private equity firm's West Coast retail team. Apollo has a reputation for being patient on deals it wants to complete. Apollo's close competitor a year ago was KKR.

Private equity sources last year said that KKR was in negotiations with Foot Locker for a deal around $28 a share, but that offer went no further after being deemed too low as the company was hoping for at least $30 a share. And while KKR is expected to take another look at the retailer, it is Apollo that is believed to be keen on the acquisition in this second go-around.Sources also said that overtures were made to Apax Partners and The Carlyle Group. A spokeswoman for Apax declined comment, as did spokesmen for both The Carlyle Group and Foot Locker.

There is also talk from across the pond that Michael Ashley of U.K.-based Sports Direct International plc might jump in with a $29 a share bid, due to interest in Foot Locker's European operations. Sources believe that if an offer is made, it might be one from Ashley himself and not through his company.

Foot Locker is scheduled to announce second-quarter earnings on Aug. 22, with its conference call to Wall Street set for Aug. 23.

Foot Locker earlier this year tried to buy Genesco Inc., but the Nashville-based firm rebuffed the Manhattan-based retailer's $1.2 billion offer. Genesco instead accepted a $1.5 billion offer from Finish Line. Genesco is holding a special shareholders' meeting on Sept. 17 to vote on the proposed merger.

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