VENATOR EARNINGS ON TARGET

Byline: Jennifer Weitzman

NEW YORK — A strong sales performance by its athletic group enabled Venator Group Inc. to report that its yearly earnings should fall in line with Wall Street’s expectations, despite the pending divestiture of its unprofitable Northern Group operation.
The New York-based athletic specialty retailer said it anticipates the coming year’s adjusted earnings to increase 15 to 20 percent. Full-year adjusted earnings for the year now concluding should range from 74 to 78 cents a share, after the addition of profits of 21 to 25 cents for the fourth quarter, adjusted to exclude Northern Group results.
The parent of Foot Locker, Lady Foot Locker and Champs Sports chains, formerly known as Woolworth Corp., earned 25 cents a share in the prior year, after adjustment for Northern Group. The Northern Group’s results will be reclassified as part of discontinued operations, requiring Venator “to record an aftertax loss of between $180 million and $220 million, which reflects the estimated impact of the divestiture and its fourth-quarter operating loss,” said Dale Hilpert, chairman and chief executive, in a statement last week. “Additionally, an estimated $120 million of unrealized foreign currency translation loss, reflected in shareholders’ equity on the balance sheet, will be realized in net income.”
Hilpert said the athletic group’s sales have been strong during the fourth quarter, “helped in part by the highly promotional holiday selling season. We expect fourth-quarter operating profit from this group to be in line with our plan and approximately three times that earned last year.”
All athletic divisions helped contribute to the rosy forecast. Foot Locker is expected to generate a 40 percent improvement in operating profits due to increased productivity and market share gains. Foot Locker Europe is expected to turn in an 80 percent increase in operating profits due to the continued strong double-digit comparable-store sales growth and store expansion. Champs Sports estimates operating profits to increase almost $60 million and a merged Lady Foot Locker and Kids Foot Locker business is expected to produce an estimated 50 percent increase in operating profits. Improvements in its Internet and catalog operations are expected to impact the bottom line as well.
However, Hilpert said Northern Group sales have been disappointing during the second half as a new merchandising strategy targeting younger customers did not meet expectations. “It is important that we do not allow this business to become a distraction from our highly successful athletic group,” Hilpert said. “The divestiture of Northern Group allows us to become totally focused on continuing to grow profitably our highly successful athletic business.”

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