Q2 2024 Foot Locker Inc Earnings Call

August 28, 2024

Good morning, and welcome to Foot Locker's second quarter, 2024 financial results conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session.

Operator: 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

Operator: This conference call may contain four looking statements that reflect management's current views or future events in financial performance. Management undertakes no obligation to update these four looking statements, which are based on any assumptions and factors, including the effects of global economic and market conditions, currency fluctuations, customer preferences, and other risks and uncertainties described more fully in the company's press releases and reports filed with the SEC, including the most recently filed Form 10-K or Form 10-Q. Any changes in such assumptions or factors could produce significantly different results, and actual results may differ materially from those contained in those four looking statements.

This conference call may contain forward-looking statements.

that reflect management's current views or future events in financial performance.

Management undertakes no obligation to update these four looking statements, which are based on any assumptions and factors, including the effects of global economic and market conditions.

Pernsey fluctuations, customer preferences, and other risk and uncertainties described more fully in the company's press releases and reports filed with the SEC, including the most recently filed form 10K or form 10K.

Any changes in such assumptions or factors could produce significantly, different results and actual results may differ materially from those contained in those four looking statements.

Operator: Please note, this conference call is being recorded.

Robert Higginbotham: I would now like to turn the conference over to Mr. Robert Higginbotham, Senior Vice President, SPNA, Investor Relations, and Treasurer.

Robert Higginbotham: Please know this conference call is being recorded. I would now like to turn the conference over to Mr. Robert Higginbotham, Senior Vice President, FP&A, and Vesta Relations, and Treasury. Sir, you may begin. Thank you, operator. Welcome everyone to Foot Locker Inc. 2nd Quarter earnings call.

Robert Higginbotham: Sir, you may begin.

Robert Higginbotham: Thank you, operator. Welcome everyone to Foot Locker Inc.'s second quarter earnings call.

Robert Higginbotham: We will begin with prepared remarks by Mary Dillon, our president and chief executive officer. Frank Bracken, our Executive Vice President and Chief Commercial Officer, will then give more detail on our results across our banners and geographies. Then Mike Bond, our Executive Vice President and Chief Financial Officer, will review our second quarter results in more detail and our 2024 financial outlook.

Speaker Change: We will begin with prepared remarks by Mary Dillon, our President and Chief Executive Officer. Frank Bracken, our Executive Vice President and Chief Commercial Officer, will then give more detail on our results across our bank and our geographies.

Speaker Change: Then Mike Bohn, our Executive Vice President and Chief Financial Officer, will review our second quarter results in more detail and our 2024 outlook.

Robert Higginbotham: Following up prepared remarks, Mary, Frank, and Mike will take your questions. To note, today's call would reference certain non-GAAP measures. A reconciliation of GAAP to non-GAAP results is included in this morning's earnings release. We also have a slide presentation posted on our Investor Relations website with information that will be referenced during the call.

Speaker Change: Following our prepared remarks, Mary, Frank, and Mike will take your questions.

Speaker Change: To note, today's call would reference certain non-gab measures, a reconciliation of gapped to non-gab results is included in this morning's earnings release.

Speaker Change: We also have a slide presentation posted on our investor relations website with information that will be referenced during the call.

Robert Higginbotham: Finally, for future planning purposes, we currently plan to release our third quarter 2024 results on Wednesday, December 4th, and now I will turn it over to Mary.

Speaker Change: Finally, for future planning purposes, we currently plan to release our 3rd quarter 2020 four results on Wednesday, December 4th and now I will turn it over to Mary.

Mary Dillon: Thank you, Rob. I'll start this morning with a brief overview of our second quarter results. I'll then comment on some recent strategic and organizational updates, and we'll close with an update on our progress against our LASA plan.

Mary Dillon: Thank you, Rob. I'll start this morning with a brief overview of our second court of results. I'll then comment on some recent strategic and organizational updates and we'll close with an update on our progress against our lace-up plan.

Mary Dillon: To start, the second quarter marks a meaningful inflection point in our business and the execution of our LASA plan. In the quarter, we saw a return to positive total and comp sales growth while also returning to gross margin expansion, which demonstrates that our strategic investments in support of the LASA plan are taking hold. Comps increased 2.6%, which was ahead of our expectations of flat to slightly positive. This was led by our global Foot Locker and Kids Foot Locker banners, which comped up 5.2%. Importantly, our comp trend strengthened as we move through the quarter, which July was our strongest month as we saw a solid start to the end.

Mary Dillon: To start the second quarter marks in being full inflection point in our business and the execution of our Lace of Plan.

Mary Dillon: In the quarter, we saw a return to positive, total, and comp sales growth, while also returning to gross margin expansion, which demonstrates that our strategic investments in support of the LASA plan are taking hold.

Mary Dillon: Comps increased 2.6% which was ahead of our expectations of flat to slightly positive. This was led by our global foot locker and kids foot locker banners which Comps up 5.2%.

Mary Dillon: Importantly, our comp-trans strengthens as we move through the quarter, which rely our strongest month as we saw a solid start to the bad-to-school season, especially in our stores, and with that strength continuing into August.

Mary Dillon: We were also particularly pleased to see stabilization in the Champ Sports banner as the banner achieved meaningful comp improvement quarter over quarter as its repositioning continues to take root. Gross margin was up 50 basis points year over year, led by underlying improvement in merchandise margins from lower promotions, as well as occupancy leverage, and offset by the planned impact of a non-recurring charge associated with our recent FLX rewards program transition.

Mary Dillon: We were also particularly pleased to see stabilization in the champs for its banner as the banner achieved meaningful content improvement quarter over quarter as its repositioning continues to take root.

Mary Dillon: Gross Margin was up 50 basis points year over year led by underlying improvement in merchandise margins from lower promotions as well as occupancy leverage and offset by the planned impact of a non-recurring charge associated with our recent FLX rewards program transition.

Mary Dillon: Williamson. Finally, non-GAAP earnings per share was a loss of $0.5, including a $0.9 impact from the non-recurring FLX charge in the quarter, which was roughly in line with their expectations. As we look forward to the remainder of the year, we have momentum coming off our strong second quarter results, and we're approaching the back half of the year with confidence. Our strategies across store experience, digital, loyalty, and brand building are continuing to take hold. The impact of our LASA plan is accelerating. Our inventories are well-positioned, and we're flowing product to better match customer demand. As such, we are reiterating our full year outlook calling for a return to Comcro and EBIT margin expansion, and we're maintaining our guidance of non-GAAP EPS of $1.50 to $1.70.

Mary Dillon: Finally, non-gap earnings per share was a loss of five cents, including a nine-cent impact from the non-recurring FLX charge in the quarter, which was roughly in line with the expectations.

Mary Dillon: As we look forward to the remainder of the year, we have momentum coming off our strong second quarter results and we're approaching the back half of the year with confidence.

Mary Dillon: Our strategies across historic experience, digital, loyalty and brand building are continuing to take hold. The impact of our lace-up plan is accelerating.

Mary Dillon: Our inventories are well positioned and we're flowing product to better match customer demands.

Mary Dillon: As such, we are reiterating our full year outlook calling for a return to Comprote and the Bitmargin expansion and we're maintaining our guidance of non-gap EPS of $1.50 to $1.70.

Mary Dillon: We remain focused on progressing against our LASA plan this year and meeting our near and longer term financial commitments, including our 8.5 to 9% EBIT margin targets by 2028.

Mary Dillon: We remain focused on progressing against our lace-a-planned this year and meeting our near and longer-term financial commitments, including our eight and a half to 9% even margin targets by 2028.

Mary Dillon: With that focus on delivering against our strategic and financial targets in mind, I'd like to comment on the changes we announced this morning to our international operations as well as our corporate real estate footprint. An overarching principle of our LASA plan is to simplify and optimize our business to ensure that we can invest behind and focus our energy on our core banners and markets in order to drive sustainable growth. As part of the LASA plan over the past few years, we've made meaningful strides in streamlining areas of our regional and banner portfolio that we're adding complexity to our business while also diluting our overall levels of profitability.

Mary Dillon: An overarching principle of a lace-up plan is to simplify and optimize our business to ensure that we can invest behind and focus our energy on, our core banners and markets in order to drive sustainable growth.

Mary Dillon: As part of the Lace of Plan over the past few years, we've made meaningful strides in streamlining areas of our regional and banner portfolio that we're adding complexity to our business while also deluding our overall levels of profitability.

Mary Dillon: In North America, we wound down banners such as Lady Foot Locker, Foot Action, East Bay, and Atmos' limited U.S. Presence. In Europe, we closed our Runners-Point Inside-Step banners, and in Asia, we converted our operations in Singapore and Malaysia to a licensed model. As we execute our LASA plan, we've identified additional opportunities for streamlining our operations, leading to this morning's announcement regarding our international business. In our Asia-Pacific region, we will begin to wind down our stores in e-commerce operations in South Korea. In Europe, we will close our stores in e-commerce businesses in Denmark, Norway, and Sweden.

Mary Dillon: In North America, we wound down banners such as Lady Footlocker, Foot Action, East Bay, and Atmosis Limited U.S. Presence.

Mary Dillon: In Europe, we close our runners point inside step-banners, and in Asia, we converted our operations in Singapore and Malaysia to a licensed model.

Mary Dillon: As we execute our lace-a-plan, we've identified additional opportunities for streamlining our operations, leading to this morning's announcement regarding our international business.

Mary Dillon: In our Asia Pacific region, we will begin to wind down our stores in e-commerce operations in South Korea.

Mary Dillon: In Europe, we will close our stores and e-commerce businesses in Denmark, Norway and Sweden.

Mary Dillon: Further, we signed agreements to transfer our operations in Greece and Romania to Forelist Group, a leading retail group and licensing partner in Southeast Europe. All of these changes are expected to be completed by mid 2025. I want to thank our teams and strippers in these markets who have worked with dedication and passion every day. Additionally, our agreements with Forelist Group include future stores in e-commerce expansion in Southeast Europe. Including expansion in Greece and Romania, the ambition is to open over 100 stores in the region over time. In combination with our plans to enter India later this year with our license partners Metro Brands and Nike Fashion, the health and contribution of our global licensing portfolio is building, as we profitably expand the global reach of our Foot Locker brand in higher growth markets with reduced levels of investment and risks.

Mary Dillon: Further, we signed agreements to transfer our operations in Greece and Romania to four-less group, a leading retail group and licensing partner in Southeast Europe.

Mary Dillon: All of these changes are expected to be completed by mid-2020-25.

Mary Dillon: I want to thank our teams and stripers in these markets to have worked with dedication and passion every day.

Mary Dillon: Additionally, our agreements with forless group include future stores in e-commerce at Fanschen in Southeast Europe. Including expansion in Greece and Romania, the ambition is to open over 100 stores in the region over time.

Operator: 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session.

Mary Dillon: In combination with our plans to enter India later this year with our licensed partners, Metro Brans and Micah Fashon.

Operator: This conference call may contain four looking statements that reflect management's current views or future events in financial performance. Management undertakes no obligation to update these four looking statements, which are based on any assumptions and factors, including the effects of global economic and market conditions, currency fluctuations, customer preferences, and other risk and uncertainty described more fully in the company's press releases and reports filed with the SEC, including the most recently filed form 10K or form 10Q. Any changes in such assumptions or factors could produce significantly different results and actual results may differ materially from those contained in those four looking statements. Please note, this conference call is being recorded.

Mary Dillon: The health and contribution of our global licensing portfolio is building as we profitably expand the global reach of our foot locker brand and higher growth markets with reduced levels of investment and risk.

Mary Dillon: desk. Next, I want to address our intentions to relocate our corporate headquarters to St. Petersburg, Florida, where we already have a meaningful executive and commercial presence in late 2025. We will be expanding our footprint in St. Petersburg as we transition from New York City and plan to maintain only a limited presence in New York City going forward. Separately, in September, we will celebrate the opening of our new global technology services hub in Dallas, which will be a key enabler of our technology infrastructure modernization under LASA. At Foot Locker, we are at our best when we support enterprise-level thinking and collaboration amongst our team members, while also looking for ways to operate with financial discipline.

Mary Dillon: Next, I want to address our intentions to relocate our corporate headquarters to St. Petersburg, Florida, where we already have a meaningful executive and commercial presence in late 2025.

Mary Dillon: We'll be expanding off footprint in St. Petersburg as we transition from New York City and planting the attain only a limited presence in New York City going forward.

Mary Dillon: Separately, in September, we will celebrate the opening of our new global technology services hub in Dallas, which will be a key enabler of our technology infrastructure modernization under LASA.

Robert Higginbotham: I would now like to turn the conference over to Mr. Robert Higginbotham, Senior Vice President, SPNA, Investor Relations, and Treasurer. Sir, you may begin. Thank you, operator.

Put Locker: At Put Locker, we are at our best when we support enterprise level thinking and collaboration amongst our team members while also looking for ways to operate with financial discipline.

Mary Dillon: Welcome everyone to Foot Locker Inc's second quarter earnings call.

Mary Dillon: We will begin with prepared remarks by Mary Dillon, our President and Chief Executive Officer. Frank Bracken, our Executive Vice President and Chief Commercial Officer, will then give more detail on our results across our banners and geographies. Then Mike Bond, our Executive Vice President and Chief Financial Officer, will review our second quarter results in more detail and our 2024 financial outlook. Following up prepared remarks, Mary, Frank, and Mike will take your questions.

Mary Dillon: Through these actions, we are ensuring ongoing strategic support of our LASA plan and operational efficiency as we focus on driving long-term sustainable growth and shareholder value creation.

Put Locker: Through these actions, we are ensuring ongoing strategic support of our Lisa Plan and operational efficiency as we focus on driving long-term, sustainable growth and shareholder value creation.

Mary Dillon: Now, with that, let me provide an update on our LASA plan and progress against our strategies in the second quarter. Starting with our first imperative, Expand Sneaker Culture, which aims to serve more customers and sneaker occasions through a curated assortment of premium brands and sneakers. With our return to positive comp sales in the second quarter led by our strong results in footwear, we are showing that we are growing our market share through our efforts to expand sneaker culture. As we return to growth in the second quarter and into the back half, we are excited about achieving growth across all aspects of our product portfolio, including a return to growth with Nike starting in the fourth quarter of this year and into 2025.

Speaker Change: Now with that, let me provide an update on our lace-up plan and progress against our strategies in the second quarter.

Speaker Change: Starting with our first imperative, Expand Snake of Culture, which aims to serve more customers and sneaker occasions through a curated assortment of premium brands and sneakers.

Mary Dillon: To note, today's call would reference certain non-GAP measures. A reconciliation of GAP to non-GAP results is included in this morning's earnings release. We also have a slide presentation posted on our Investor Relations website with information that will be referenced during the call.

Speaker Change: With our return to positive comp sales in the second quarter, led by our strong results in footwear, we're showing that we are growing our market share through our efforts to expand sneaker culture.

Speaker Change: As we returned to growth in the second quarter and into the back half, we're excited about achieving growth across all aspects of our product portfolio, including a return to growth with Nike starting in the fourth quarter of this year and into 2025.

Mary Dillon: Finally, for future planning purposes, we currently plan to release our third quarter 2024 results on Wednesday December 4th, and now I will turn it over to Mary. Thank you, Rob. I'll start this morning with a brief overview of our second quarter results. I'll then comment on some recent strategic and organizational updates, and we'll close with an update on our progress against our LASA plan. To start, the second quarter marks a meaningful inflection point in our business and the execution of our LASA plan.

Mary Dillon: We will achieve this through our emphasis on our mutual pillars of basketball, kids, and sneaker culture and leading into our elevated storytelling and partnerships, such as the MBA, Home Court, and the clinic. For example, in the second quarter, we collaborated with Nike and Jordan Brand to tap into the growing popularity of women's basketball through a clinic activation featuring WNBA guard for the Atlanta Dream, Ariel Powers, former WNBA player, Lynne Harper of the Chicago Sky, and Jordan Brand athletes, including Michaela Williams of the LSU Tigers, Kiki Rice of the UCLA Bruins, and Kiyomi McMiller of Rutgers Scarlet Knights.

Speaker Change: Will achieve this to our emphasis on our mutual pillars of basketball, kids and sneaker culture, and leading into our elevated storytelling and partnerships such as the NBA, home court, and the clinic.

Speaker Change: For example, in the second quarter, we collaborated with Nike and Jordan Brand to tap into the growing popularity of women's basketball. Through a clinic activation featuring WNBA guard for the Atlanta Drain Aerial Powers.

Mary Dillon: In the quarter, we saw a return to positive total and comp sales growth while also returning to gross margin expansion, which demonstrates that our strategic investments in support of the LASA plan are taking hold. Comps increased 2.6%, which was ahead of our expectations of flat to slightly positive. This was led by our global footlocker and kids footlocker banners, which comped up 5.2%. Importantly, our comp trend strengthened as we move through the quarter, which July our strongest month as we saw a solid start to the end.

Speaker Change: former WNBA player of Linnae Harper of the Chicago Sky, and Jordan Brand athletes, including Michaela Williams of the LSU Tigers, Kiki Rice of the UCLA Bruins, and Kiyomi McMiller of Rutgers Scarlett Knights.

Mary Dillon: In July, we hosted a two-day activation in Phoenix featuring a skills and drills clinic with young women hoopers, followed by an engaging panel discussion. Our celebration of women's basketball with the clinic speaks to what we continue to see as a key opportunity for our business, as we look ahead, namely our women's business. Women's has consistently been our fastest growing business for the past few years. Looking out, we continue to see ongoing opportunity in the women's category. As we tap into the women's opportunity broadly, our brand diversification efforts play an important role as we see more women come into our funnel through our wider brand selection.

Speaker Change: In July, we hosted a two-day activation of scenics featuring the skills and drills clinic with young women who burrs followed by an engaging panel discussion.

Speaker Change: Our celebration of women's basketball with the clinics speaks to what we continue to see as a key opportunity for our business, as we look ahead, namely our women's business.

Mary Dillon: We were also particularly pleased to see stabilization in the champ sports banner as the banner achieved meaningful comp improvement quarter over quarter as its repositioning continues to take root. Gross margin was up 50 basis points year over year led by underlying improvement in merchandise margins from lower promotions, as well as occupancy leverage, and offset by the planned impact of a non-recurring charge associated with our recent FLX rewards program transition. Williamson. Finally, non-Gap earnings per share was a loss of $0.5 including a $0.9 impact from the non-recurring FLX charge in the quarter, which was roughly in line with their expectations.

Speaker Change: Women has consistently been our fastest growing business for the past few years. Looking out, we continue to see ongoing opportunity in the Women's category.

Speaker Change: As we tap into the women's opportunity broadly, our brand diversification efforts play an important role as we see more women come into our funnel through our wider brand selection.

Mary Dillon: In the second quarter, we introduce our first-ever spring style and trend campaign in partnership with Adidas and New Balance. The campaign strategically targeted women and earned us nearly 3 billion media impressions. Looking ahead, next month marks the Foot Locker brand's 50th anniversary, and we have some exciting plans to help celebrate our rich history at the heart of basketball and sneaker culture. with one of a kind of events and exclusive co-creative products from Nike, New Balance, Adidas, Puma, and Converse. We can't wait to celebrate where we've been and where we're headed throughout the next 50 years.

Speaker Change: In the second quarter, we introduced our first ever spring-style and trend campaign in partnership with the Didas and New Balance. The campaign strategically targeted women and earned us nearly 3 billion media impressions.

Speaker Change: Looking ahead, next month marks the Foot Locker Brand's 50th anniversary and we have some exciting plans to help celebrate our rich history at the heart of basketball and sneaker culture.

Mary Dillon: As we look forward to the remainder of the year, we have momentum coming off our strong second quarter results and we're approaching the back half of the year with confidence. Our strategies across store experience, digital, loyalty, and brand building are continuing to take hold. The impact of our LASA plan is accelerating. Our inventories are well-positioned and we're flowing product to better match customer demand. As such, we are reiterating our full year outlook calling for a return to Comcro and EBIT margin expansion and we're maintaining our guidance of non-Gap EPS of $1.50 to $1.70. We remain focused on progressing against our LASA plan this year and meeting our near and longer term financial commitments, including our 8.5 to 9% EBIT margin targets by 2028.

Speaker Change: with one of the kind of events and exclusive co-creative products from Nike, New Balance, Adidas, Puma and Converse. We can't wait to celebrate where we've been and where we're headed throughout the next 50 years.

Mary Dillon: And finally, as we drive greater distinction in our assortments, our exclusive penetration in the quarter was 13%, down 100 basis points year over year, against some tougher franchise comparisons and reflecting stronger relative to the strength from base aspects of our portfolio, especially among women and kids.

Speaker Change: Thank you for watching.

Speaker Change: And finally, as we drive greater distinction in our shortments, our exclusive penetration in the quarter was 13%. Down 100 basis points year over year, again some tougher franchise comparisons and reflecting stronger relative strength from base aspects of our portfolio, especially among women's and kids.

Mary Dillon: The second pillar of Lace Up is Power Up the Portfolio, which means transforming our real estate footprint and continuing to differentiate our banners. On real estate transformation, we're continuing the progress we've made last quarter with our reimagined store concept. We followed up the successful opening of our first concept door in New Jersey this spring with our second concept door in Paris, La Daphonse and May. Both stores truly bring the heart of sneakers to life. Responsed to this new concept has been very positive from our brand partners, strippers, and customers. In both locations, we've seen higher conversion levels and basket sizes, and immediately increased penetration of women's footwear compared to the balance of chain.

Speaker Change: The second pillar of lace-up is power of the portfolio which means transforming our real estate footprint and continuing to differentiate our banners.

Speaker Change: On Real Estate Transformation, we're continuing the progress we've made last quarter with our reimagined store concept. We followed up the successful opening of our first concept door in New Jersey this spring with our second concept door in Paris, La Defance in May.

Speaker Change: Both stores truly bring the heart and sneakers to life.

Speaker Change: Response to this new concept has been very positive from our brand partners, strippers and customers. In both locations, we've seen higher conversion levels and basket sizes, and meaningfully increased penetration of women's footwear compared to the balance of chain.

Mary Dillon: We have formally named this new concept as Footlocker Reimagined, and these concepts are intended to be the next evolution of our store formats and the go-forward expression of our brand. Just last week, we were thrilled to reopen our iconic 34th Street store in New York City as our third Foot Locker reimagined door. This location puts our best and most modern foot forward in the heart of Manhattan and redefines how we engage with sneaker enthusiasts. The store features a pivotal advancement with our new home court concept, which recall is our premier multi-branded basketball experience. Home court developed in partnership with Nike and Jordan brand embodies our vision to deliver the ultimate global multi-branded basketball experience through customer-centric design, immersive digital experiences, and enhanced technology, all with exceptional service by our strippers.

Speaker Change: We have formally named this new concept as Foot Locker Reimagined, and these concepts are intended to be the next evolution of our store format and the go forward expression of our brand.

Mary Dillon: In North America, we wound down banners such as Lady Foot Locker, Foot Action, East Bay, and Atmos' Limited U.S. Presence. In Europe, we closed our runners-point inside-step banners, and in Asia, we converted our operations in Singapore and Malaysia to a licensed model. As we execute our LASA plan, we've identified additional opportunities for streamlining our operations, leading to this morning's announcement regarding our international business. In our Asia-Pacific region, we will begin to wind down our stores in e-commerce operations in South Korea.

Speaker Change: Just last week, we were thrilled to reopen our iconic 34-street store in New York City as our third foot-locker re-imagined door. This location puts our best and most moderate foot-forward in the heart of Manhattan and redefines how we engage with sneaker enthusiasts.

Speaker Change: The store features a pivotal advancement with our new home court concept, which recall is our premier multi-branded basketball experience.

Speaker Change: Home Court developed in partnership with Nike and Jordan Brown and bodies are visions to deliver the ultimate global multi-brand basketball experience.

Mary Dillon: In Europe, we will close our stores in e-commerce businesses in Denmark, Norway, and Sweden. Further, we signed agreements to transfer our operations in Greece and Romania to Forelist Group, a leading retail group and licensing partner in Southeast Europe. All of these changes are expected to be completed by mid 2025. I want to thank our teams and strippers in these markets who have worked with dedication and passion every day. Additionally, our agreements with Forelist Group include future stores in e-commerce expansion in Southeast Europe.

Speaker Change: through customer-centric design, immersive digital experiences, and enhanced technology. All with exceptional service by our strippers.

Mary Dillon: Including expansion in Greece and Romania, the ambition is to open over 100 stores in the region over time. In combination with our plans to enter India later this year with our license partners Metro Brands and Nike Fashion, the health and contribution of our global licensing portfolio is building, as we profitably expand the global reach of our footlocker brand in higher growth markets with reduced levels of investment and risks, desk.

Mary Dillon: We intend to roll out this latest version of Home Court and select stores going forward. 34th Street also features our updated Kids Footlocker concept for the first time ever with a new look and feel. Given the strong response we are seeing to our first few reimagined doors, we are pulling forward three additional locations this year, with a total of eight now planned to open in 2024. This will include our new store later this quarter in Delhi, India, which will mark our entry into this marketing coordination with our licensing partners Metro Brands Limited and Nike Fashion.

Speaker Change: We intend to roll out this latest version of home court and select stores going forward.

Speaker Change: 34th Street also features updated Kids Foot Locker concept for the first time ever with a new look and feel.

Speaker Change: Given the strawberry stones we are seeing to our first few reimagined doors, we are pulling forward three additional locations this year with a total of eight now planned to open in 2024.

Speaker Change: This will include our new store later this quarter in Delhi, India, which will mark our entry into this market in coordination with our licensing partners Metro Brands Limited and Nike Fashion.

Mary Dillon: In addition to these new retail concepts, we continue to make headway on our store refresh program, which aims to bring even more of our fleet up to an elevated and consistent brand standard globally. Elements of our refresh program were informed by the same design brief as Reimagined, speaking to how Reimagined is serving as the blueprint of our future brand expression going forward. In the second quarter, we completed 67 refreshes. These refreshes are in addition to the over 100 doors we've touched over the last few quarters as we've executed the program. And we'll continue to scale as we move through the back half. We remain on target to ramp the program as we go through the third and fourth quarter, especially given that our execution of these refreshes continues to improve, in some cases turned around in just 24 hours.

Speaker Change: In addition to these new retail concepts, we continue to make headway on our Store Refresh Program, which aims to bring even more of our fleet up to an elevated and consistent brand-standard globally.

Speaker Change: Elements of our Refresh Program weren't formed by the same design brief as reimagined. Speaking to how reimagined is serving as the blueprint of our future brand expression going forward.

Speaker Change: In the second quarter, we completed 67 refreshes. These refreshes are in addition to the over 100 doors we've touched over the last few quarters as we've executed the program. And we'll continue to scale as we move through the back half of the year.

Mary Dillon: Petersburg as we transition from New York City and plan to maintain only a limited presence in New York City going forward. Separately, in September, we will celebrate the opening of our new global technology services hub in Dallas, which will be a key enabler of our technology infrastructure modernization under LASA. At Foot Locker, we are at our best when we support enterprise level thinking and collaboration amongst our team members, while also looking for ways to operate with financial discipline. Through these actions, we are ensuring ongoing strategic support of our LASA plan and operational efficiency as we focus on driving long term sustainable growth and shareholder value creation.

Speaker Change: We remain on target to ramp the program as we go through the third and fourth quarter, especially given that our execution of these refreshes continues to improve, in some cases turned around in just 24 hours.

Mary Dillon: From a cap of a return perspective, we continue to see these refreshes hitting our internal hurdle rates and payback periods, supported by both Komp's and gross margins outperforming the balance of chain. Our new concepts, including Foot Locker Reimagined, now represent 17% of our global square footage, up from 12% last year and moving further towards our 2026 target of 20%. Adding our store refreshes on top of our new concepts, we were committed to elevating approximately two thirds of our Global Foot Locker and Kids Foot Locker doors up to our Reimagined Brand Standard by year-end 2025.

Speaker Change: From a cap of a return perspective, we continue to see these refreshes hitting our internal hurdle rates and payback periods, supported by both cops and gross margins outperforming the balance of chain.

Speaker Change: Our new concepts, including Foot Locker Reabagine, now represent 17% of our global square footage up from 12% last year and moving further towards our 26th target of 20%.

Mary Dillon: Now with that, let me provide an update on our LASA plan and progress against our strategies in the second quarter. Starting with our first imperative, Expand Sneaker Culture, which aims to serve more customers and sneaker occasions through a curated assortment of premium brands and sneakers. With our return to positive comp sales in the second quarter led by our strong results in footwear, we are showing that we are growing our market share through our efforts to expand sneaker culture.

Speaker Change: Adding our store refreshes on top of our new concepts were committed to elevating approximately two-thirds of our global foot locker and kids foot locker doors up to our reimagined brand standard by year end 2025.

Mary Dillon: And finally, we're making strides in our shift to optimal. Penetration reached 40% of North American square footage, up 4 points from a year ago and closer to our goal at 50% by 2026. As we work to strengthen our portfolio, a key objective has been to stabilize the Champ's Sports banner. As such, we were pleased to see progress with the repositioning of the banner in the second quarter. Komp's declined 3.9%, which was a meaningful improvement from the first quarter and reflecting positive footwear camps. As we make progress in the banner's repositioning, we're seeing increases in brand awareness and share of wallet among the active athlete customer segment.

Speaker Change: And finally, we're making strides in our shift to off-mall. Penetration reached 40% of North American square footage, up 4 points from a year ago, and closer to our goal at 50% by 2026.

Mary Dillon: As we return to growth in the second quarter and into the back half, we are excited about achieving growth across all aspects of our product portfolio, including a return to growth with Nike starting in the fourth quarter of this year and into 2025. We will achieve this through our emphasis on our mutual pillars of basketball, kids and sneaker culture and leading into our elevated storytelling and partnerships, such as the MBA, home court, and the clinic.

Speaker Change: As we work to strengthen our portfolio, a key objective has been to stabilize the Chancellor's banner. As such, we were pleased to see progress with the repositioning of the banner in the second

Speaker Change: Combs decline 3.9% which was a meaningful improvement from the first quarter and reflecting positive footwear comes.

Mary Dillon: For example, in the second quarter, we collaborated with Nike and Jordan Brand to tap into the growing popularity of women's basketball, through a clinic activation featuring WNBA Guard for the Atlanta Dream, Ariel Powers, former WNBA player, Lynne Harper of the Chicago Sky, and Jordan Brand athletes, including Michaela Williams of the LSU Tigers, Kiki Rice of the UCLA Bruins, and Kiyomi McMiller of Rutgers Scarlet Knights. In July, we hosted a two-day activation in Phoenix featuring a skills and drills clinic with young women hoopers followed by an engaging panel discussion.

Speaker Change: As we make progress in the Banners' repositioning, we're seeing increases in brand awareness and share of wallet among the active athlete customer segment.

Mary Dillon: During the quarter, we took another big step forward with the banner with the launch of Champs Sports' new brand platform titled Sport for Life, which celebrates the powerful connection between sports and the on-the-go lifestyle of our active consumers. With an assist from Michael Parsons of the Dallas Cowboys, Francisco Linder of the New York Metz, and Jalen Waddle of the Miami Dolphins, responsible customers and our brand partners to the elevated platform has been positive. We're excited about the expanded and elevated vision for the champ's sports banner looking ahead, and we'll have more to share in future quarters about the banner's evolution.

Speaker Change: During the quarter we took another big step forward with the banner with the launch of champsports, new brand platform titled Sport for Life, which celebrates the powerful connection between sports and the on-the-go lifestyle of our active consumers.

Speaker Change: with an assistant, Micah Parsons of the Dallas Cowboys, Francisco Linder of the New York Mets.

Speaker Change: in Jalen Waddle of the Miami Dolphins, responsible customers and our brand partners to the elevated platform has been positive. We're excited about the expanded and elevated vision for the Champs Sports Banner looking ahead and we'll have more to share in future quarters about the Banner's evolution.

Mary Dillon: Our celebration of women's basketball with the clinic speaks to what we continue to see as a key opportunity for our business, as we look ahead, namely our women's business. Women's has consistently been our fastest growing business for the past few years. Looking out, we continue to see ongoing opportunity in the women's category. As we tap into the women's opportunity broadly, our brand diversification efforts play an important role as we see more women come into our funnel through our wider brand selection. In the second quarter, we introduce our first-ever spring style and trend campaign in partnership with Adidas and New Balance. The campaign strategically targeted women and earned us nearly 3 billion media impressions.

Mary Dillon: Our third pillar is deepen our relationship with our customers, with a key anchor being our redesigned loyalty program and development of overall CRM capabilities. To start, a key milestone for our business was the relaunch of our enhanced FLX Rewards program in the US in mid-June. 24% of our sales in the second quarter were through our loyalty program, which was up 200 basis points compared to last year. Through the addition of point redemptions for cash discounts and other perks under the program, we expect to drive greater customer frequency and share of wallet. We've been very pleased with our members' response to date across a variety of KPIs, including an encouraging pace of enrollments, higher engagement with first-time redeemers, higher average order values compared to non-loyalty members, and higher units per transaction.

Speaker Change: Our third pillar is deep in our relationship with our customers, with a key anchor being a redesigned loyalty program and development of overall CRM capabilities.

Speaker Change: To start a key milestone for our business was the relaunch of our enhanced F-O-X rewards program in the U.S. in mid-June.

Speaker Change: 24% of our sales in the second quarter, with through our loyalty program, which is up 200 basis points compared to last year. Through the addition of point redensions for cash discounts and other perks under the program, we expect to drive greater customer frequency and share of wallet.

Mary Dillon: Looking ahead, next month marks the footlocker brand's 50th anniversary, and we have some exciting plans to help celebrate our rich history at the heart of basketball and sneaker culture, with one of a kind of events and exclusive co-creative products from Nike, New Balance, Adidas, Puma and Converse. We can't wait to celebrate where we've been and where we're headed throughout the next 50 years. And finally, as we drive greater distinction in our assortments, our exclusive penetration in the quarter was 13%, down 100 basis points year over year, against some tougher franchise comparisons, and reflecting stronger relative to the strength from base aspects of our portfolio, especially among women and kids.

Speaker Change: We've been very pleased with our members' response to the across a variety of KPIs, including an encouraging pace of enrollment, higher engagement with first-time redeemers, higher average order values compared to non-goiled team members, and higher units per transaction.

Mary Dillon: As we move into the back to school and holiday selling periods, we're continuing to scale and activate the new program and benefits.

Speaker Change: As we move into the back to school and holiday selling periods, we're continuing to scale and activate the new program and benefits. And we look forward to sharing incremental insights as the program moves towards our 50% loyalty penetration target by 2026.

Mary Dillon: And we look forward to sharing incremental insights as the program moves towards our 50% loyalty penetration target by 2020- Dex, and turning to our final pillar to be Best in Class Omni, which means improving our digital presence and better integrating our customer journey across channels. Our digital penetration in the quarter increased to 15.9%, up 40 basis points year over year, and we continue to target about 25% e-commerce penetration by 2026. On an enterprise level, global digital comps were up nearly 4%, and we continue to make strides in our online conversion rate. In the second quarter, we made ongoing improvements to the online customer experience through elevated site content messaging, enhanced navigation and search capabilities, and, importantly, a product detailed page redesign.

Speaker Change: and turning to our final pillar to be best in class on the, which means improving our digital presence and better integrating our customer journey across channels.

Speaker Change: Our digital penetration in the quarter increased to 15.9% up 40 basis points year over year and we continue to target about 25% e-commerce penetration by 2026.

Mary Dillon: The second pillar of lace up is power up the portfolio, which means transforming our real estate footprint and continuing to differentiate our banners. On real estate transformation, we're continuing the progress we've made last quarter with our reimagined store concept. We followed up the successful opening of our first concept door in New Jersey this spring with our second concept door in Paris, La Daphonse and May. Both stores truly bring the heart of sneakers to life.

Speaker Change: On an enterprise level, global digital comps were up nearly 4% and we continue to make strides and our online conversion rate.

Speaker Change: In the second quarter, we made ongoing improvements to the online customer experience to elevate its site content and messaging, enhance navigation and search capabilities, and importantly, a product detail page redesign.

Mary Dillon: Responsed to this new concept has been very positive from our brand partners, strippers and customers. In both locations, we've seen higher conversion levels and basket sizes and immediately increased penetration of women's footwear compared to the balance of chain. We have formally named this new concept as footlocker reimagined, and these concepts are intended to be the next evolution of our store formats and the go-forward expression of our brand. Just last week, we were thrilled to reopen our iconic 34th Street store in New York City as our third footlocker reimagined door.

Mary Dillon: We remain on track to roll out a new Foot Locker mobile app later this year in the fourth quarter, which will provide a faster, more modern shopping experience, along with greater product inspiration and storytelling, and serve as a hub for a new loyalty program. In our stores, comp sales accelerated meaningfully in the quarter as customers responded to our fresh summer assortments at full price. Our Striper training focuses on the channel selling behavior and product education tools that are driving increases in our store-of-level conversion.

Speaker Change: We remain on track to roll out a new footlock removal app later this year in the fourth quarter which will provide a faster, more modern shopping experience along with greater product inspiration and storytelling and serve as a hub for a new loyalty program.

Speaker Change: In our store's comp sales accelerated meaningfully in the quarter, as customers responded to our fresh summer, shortments, and full price.

Speaker Change: Our Striper Training focus on the channel selling behavior and product education tools that are driving increases in our store of level conversion.

Mary Dillon: In closing, we see a return to positive sales and comp growth in the quarter, as well as gross margin expansion as proof points that the laser plan is working.

Mary Dillon: This location puts our best and most modern foot forward in the heart of Manhattan and redefines how we engage with sneaker enthusiasts. The store features a pivotal advancement with our new home court concept, which recall is our premier multi-branded basketball experience. Home court developed in partnership with Nike and Jordan brand embodies our vision to deliver the ultimate global multi-branded basketball experience through customer-centric design, immersive digital experiences, and enhanced technology all with exceptional service by our strippers.

Speaker Change: In closing, we see a return to positive sales in Compros in the quarter, as well as Gross March and Expansion, as proof points at the Lacer Plan is working.

Speaker Change: We're approaching the remainder of the year with confidence as our strategies are continuing to build momentum. And now let me hand it over to Frank to provide more details on our category and banner performance.

Frank Bracken: Thank you, Mary, and good morning, everyone. Starting with second quarter product and brand partner performance, footwear comp to positive, high single digits. Within the basketball category, we continue to invest and see strength within our portfolio of next-gen signature athletes, like Nike, Sabrina, INSQ, Devon Booker, and John Moran, along with the Jordan athlete and NBA champion, Jason Tatum. Next to that, we continue to drive energy and strong cell-thrues with the Adidas AE1 and the MBO3 from Kuma, as we remain confident in the diversity and energy of our signature basketball portfolio, and look forward to delivering even more innovation and excitement later this third quarter at the NBA season tips off.

Frank Bracken: Thank you, Mary, and good morning, everyone. Starting with second quarter product and brand partner performance, footwear comes positive high-single digits.

Speaker Change: with in the basketball category, we continue to invest and see strength within our portfolio of next-gen signature athletes like Nike, Sabrina, INSQ, Devon Booker and John Moran, along with the Jordan Athlete and NBA Champion Jason Tatum.

Mary Dillon: We intend to roll out this latest version of home court and select stores going forward. 34th Street also features our updated kids footlocker concept for the first time ever with a new look and feel. Given the strong response we are seeing to our first few reimagined doors, we are pulling forward three additional locations this year with a total of eight now planned to open in 2024. This will include our new store later this quarter in Delhi, India, which will mark our entry into this marketing coordination with our licensing partners Metro Brands Limited and Nike Fashion.

Speaker Change: Next to that, we continue to drive energy and strong cell thru with the Adidas AE1 and the MBO3 from Kuma.

Speaker Change: As we remain confident in the diversity and energy of our signature basketball portfolio and look forward to delivering even more innovation and excitement later this third quarter at the NBA season tips off.

Frank Bracken: Importantly, the game of basketball and its influence continues to grow globally, as evidenced by the Olympic Games this past month. As the U.S. women's and men's teams both won gold medals. The tournament demonstrated how globally competitive, inclusive, and inspiring the sport has become, and the role it plays in driving both sport and culture across the globe. Within the culture of basketball, Nike's Dunk and Air Force 1 and the Jordan AJ1 continue to be icons of the sneaker category and remain among our most important franchises with consumers. Likewise, our Jordan Retro business continues to be a critical connection point to a new generation of consumers who celebrate basketball, culture, and street wear, and we saw strong cell-thrues as we exited the quarter and then the beginning of back to school.

Speaker Change: Importantly, the game of basketball and its influence continues to grow globally, as evidenced by the Olympic Games this past month.

Speaker Change: As the US women's and men's team both won gold medals, the tournament demonstrated how global competitive, inclusive, and inspiring this sport has become, and the role it plays in driving both sport and culture across the globe.

Speaker Change: with in the culture of basketball, Nike's dunk and Air Force One and the Jordan AJ1 continue to be icons of the sneaker category and remain among our most important franchises with consumers.

Speaker Change: Likewise, our Jordan Retro Business continues to be a critical connection point to new generation of consumers who celebrate basketball, culture and streetwear. And we saw strong cell thru as we exited the quarter and then the beginning of back to school.

Mary Dillon: And we'll continue to scale as we move through the back half We remain on target to ramp the program as we go through the third and fourth quarter, especially given that our execution of these refreshes continues to improve, in some cases turned around in just 24 hours. From a cap of a return perspective, we continue to see these refreshes hitting our internal hurdle rates and payback periods, supported by both Komp's and Gross margins outperforming the balance of chain.

Frank Bracken: To ensure that Foot Locker stays at the forefront of the basketball category, we are thrilled to have opened our newest home court concept last week at our iconic 34-street Foot Locker store in New York City. Designed in partnership with the Nike and Jordan brands, this elevated basketball experience brings together the best of signature, lifestyle, and retro basketball with one-of-a-kind consumer experiences. This concept will serve as the blueprint moving forward as we are on the journey to deliver 100 home court experiences globally by 2026. It is believed as the undeniable destination for all things basketball.

Speaker Change: to ensure that Footlocker stays at the forefront of the basketball category. We are thrilled to have opened our newest home court concept last week at our iconic 34-street Footlocker store in New York City.

Speaker Change: Designed in partnership with the Nike and Jordan Brands, this elevated basketball experience brings together the best of signature lifestyle and retro basketball with one of a kind consumer experiences.

Mary Dillon: Our new concepts, including Foot Locker Reimagined, now represent 17% of our Global Square footage up from 12% last year and moving further towards our 2026 target of 20%. Adding our store refreshes on top of our new concepts were committed to elevating approximately two thirds of our Global Foot Locker and Kids Foot Locker doors up to our Reimagined Brand Standard by year-end 2025.

Speaker Change: This concept will serve as the blueprint moving forward as we are on the journey to deliver 100 home-court experiences globally by 2026.

Speaker Change: Combined with our NBA partnership and the support of all of our brand partners, Foot Locker will continue to lead as the undeniable destination for all things basketball.

Frank Bracken: Turning to the lifestyle category, Adidas continues to lead the global terrorist trend, especially with our women's and kids' consumers. Our business with Adidas strengthened in the second quarter as we flowed new colors and powerful retail stories through franchises such as the Samba, Campus and Gazelle. Our order book and go to market plans remain very strong as we go through the back to school time period, and we are encouraged by the robust pipeline of innovation and creativity that Adidas has shared with us looking forward. In lifestyle running, we continued our strong momentum with new balance through door expansions in women's and kids, as well as like-for-like gains.

Mary Dillon: And finally, we're making strides in our shift to optimal. Penetration reached 40% of North American Square Footage up 4 points from a year ago and closer to our goal at 50% by 2026. As we work to strengthen our portfolio, a key objective has been to stabilize the champ's sports banner. As such, we were pleased to see progress with the repositioning of the banner in the second quarter. Komp's declined 3.9%, which was a meaningful improvement from the first quarter and reflecting positive footwear camps.

Speaker Change: Turning to the lifestyle category, Adidas continues to lead a global terrorist trend, especially with our women's and kids consumers.

Speaker Change: Our business with the deed is strengthened in the second quarter, as we flowed new colors and powerful retail stories through franchises such as the Samba, Campus and Gazelle.

Mary Dillon: As we make progress in the banner's repositioning, we're seeing increases in brand awareness and share wallet among the active athlete customer segment. During the quarter, we took another big step forward with the banner with the launch of Champs Sports' new brand platform titled Sport for Life, which celebrates the powerful connection between sports and the on-the-go lifestyle of our active consumers. With an assist from Michael Parsons of the Dallas Cowboys, Francisco Linder of the New York Metz, and Jalen Waddle of the Miami Dolphins, responsible customers and our brand partners to the elevated platform has been positive. We're excited about the expanded and elevated vision for the champ's sports banner looking ahead and we'll have more to share in future quarters about the banner's evolution.

Speaker Change: Our order book and go to market plans remain very strong as we go through the back-to-school time period. And we are encouraged by the robust pipeline of innovation and creativity that a data is shared with us looking forward.

Speaker Change: In lifestyle running, we continue to our strong momentum with new balance, through door expansions in women's and kids, as well as like for like games.

Frank Bracken: Our partners at New Balance continue to engage our shared consumers with strong product innovation, compelling assets and storytelling, and operational excellence to help scale the business. With multiple footwear franchises connecting in the marketplace and a commitment to sport lifestyle and streetwear, we are confident that we will continue to grow with this important partner. Another strong brand that is leveraging its authenticity and running is ASICS. We are seeing strong global momentum with ASICS and multiple footwear franchises across men's, women's, and kids. Next to that, Champs Sports has partnered with ASICS on their performance running line and also executed multiple run club events with consumers this year.

Speaker Change: Our partners at New Balance continue to engage our shared consumers with strong product innovation, compelling assets and storytelling, and operational excellence to help scale the business.

Speaker Change: with multiple footwear franchises connecting in the marketplace and a commitment to sport, lifestyle, and streetwear. We are confident that we will continue to grow with this important partner.

Speaker Change: Another strong brand that is leveraging its authenticity in running is Asics.

Speaker Change: We are seeing strong, level momentum with ASICS and multiple footwear franchises across men's, women's and kids.

Speaker Change: Next to that, champs sports has partnered with A6 on their performance running line, and also executed multiple run club events with consumers this year.

Mary Dillon: Our third pillar is deepen our relationship with our customers with a key anchor being our redesigned loyalty program and development of overall CRM capabilities. To start, a key milestone for our business was the relaunch of our enhanced FLX rewards program in the US in mid-June. 24% of our sales in the second quarter were through our loyalty program, which was up 200 basis points compared to last year. Through the addition of point redemptions for cash discounts and other perks under the program, we expect to drive greater customer frequency and share of wallet.

Frank Bracken: With our partners at Nike, we continue to revitalize the Max Air business through their innovative platform, Dynamic Air. And in the back half of this year, we will increase door count for Air Max DN across all genders, and we are excited to flow new colors and stories into our business. Next to that, we continue to elevate our exclusive tuned air franchise globally, investing in digital content, consumer experiences, and elevated in-store merchandising. We also saw momentum with Nike in our second quarter across heritage running franchises, including Vomero, V2K, and P6000. Our door base and depth in these franchises is improving in our back to school selling period as well as the fourth quarter, and we are pleased to dimensionalize the running business with them.

Speaker Change: With our partners at Nike, we continue to revitalize the Max Air Business through their innovative platform dynamic air. And in the back half of this year, we will increase door count for air max D and across all genders, and we are excited to follow new colors and stories into our business.

Speaker Change: Next to that, we continue to elevate our exclusive tuned air franchise globally, investing in digital content, consumer experiences, and elevated in store merchandising.

Mary Dillon: We've been very pleased with our members' response to date across a variety of KPIs, including an encouraging pace of enrollments, higher engagement with first-time redeemers, higher average order values compared to non-loyalty members, and higher units per transaction. As we move into the back to school and holiday selling periods, we're continuing to scale and activate the new program and benefits.

Speaker Change: We also saw momentum with Nike in our second quarter across heritage running franchises, including Bill Merrill, V2K, and P6000.

Speaker Change: Our door-based and depth in these franchises is improving in our back-to-school selling period as well as the fourth quarter. And we are pleased to dimensionize the run-thing business with them.

Frank Bracken: Within performance running, On and Hoka are continuing to bring new consumers into sneaker culture, especially women and kids. We grew with both of these brands and both a door and allocation basis in the second quarter, as we also see our retail banners as helping to introduce younger, more multicultural consumers to their brands. And while the vulcanized footwear category remains challenged overall, we're seeing encouraging trends out of the Vans brand, especially through their new school franchise. We are building our stock levels in this compelling franchise as we navigate the back half of the year, and we will continue to work with them to connect their classics and innovation to our consumer base.

Speaker Change: with performance running on and hoka are continuing to bring new consumers into sneaker culture, especially women and kids.

Mary Dillon: And we look forward to sharing incremental insights as the program moves towards our 50% loyalty penetration target by 2020- Dex, and turning to our final pillar to be Best in Class Omni, which means improving our digital presence and better integrating our customer journey across channels. Our digital penetration in the quarter increased to 15.9% up 40 basis points year over year, and we continue to target about 25% e-commerce penetration by 2026. On an enterprise level, global digital comps were up nearly 4%, and we continue to make strides and our online conversion rate.

Speaker Change: We grew with both of these brands and both a door and allocation basis in the second quarter. As we also see our retail banners is helping to introduce younger, more multicultural consumers to their brands.

Speaker Change: and while the Vulcan Ice Footwear category remains challenged overall, we're seeing encouraging trends out of the band's brand, especially through their new school franchise.

Speaker Change: We are building our stock levels in this compelling franchise as we navigate the back half of the year and we will continue to work with them to connect their classics and innovation to our consumer base.

Frank Bracken: Finally, as we look ahead to the fall and holiday season, brands like Ugg will continue to be a larger part of our plans, especially for our female consumers. Next to that, we are excited for a strong boot season with Timberlin this fall and holiday, as they have done a tremendous job linking their iconic brand to fashion. We are excited for fashion and culture, driving great consumer anticipation this fall.

Speaker Change: Finally, as we look ahead to the fall and holiday season, brands like UG will continue to be a larger part of our plans, especially for our female consumers.

Mary Dillon: In the second quarter, we made ongoing improvements to the online customer experience through elevated site content messaging, enhanced navigation and search capabilities, and importantly, a product detailed page redesign. We remain on track to roll out a new Foot Locker mobile app later this year in the fourth quarter, which will provide a faster, more modern shopping experience, along with greater product inspiration and storytelling, and serve as a hub for a new loyalty program.

Speaker Change: Next to that, we are excited for a strong boot season with Timberland this fall and holiday. As they have done a tremendous job linking their iconic brand to fashion and culture, driving great consumer anticipation this fall.

Frank Bracken: Turning to the apparel business, challenges persisted with comps down mid-teens. While the promotional environment and apparel remains difficult, we believe we can do more to stabilize the category with greater key item and sneaker connectivity, while also filling in gaps in our assortments with a compelling private label offering. One of the standouts within our apparel business was our Champs Sports Private Label Performance within CSG. CSG comp paused for the quarter, and we have delivered a compelling assortment for the back to school season, including new active wear styles, as well as new assortments and bottoms. Finally, our accessories business comps up mid single digits as we focus on our complimentary socks, shoe care, and headwear categories, which is helping drive our UBT's and driver's creative merchandise margins.

Speaker Change: Turning to the apparel business, challenges persisted with calm-stown mid-teens.

Speaker Change: While the promotional environment in a peril remains difficult, we believe we can do more to stabilize the category with greater key item and sneaker connectivity. We'll also filling in gaps in our sortments with a compelling private label offering.

Mary Dillon: In our stores, comp sales accelerated meaningfully in the quarter as customers responded to our fresh summer assortments at full price. Our Striper training focus on on the channel selling behavior and product education tools that are driving increases in our store-of-level conversion.

Speaker Change: One of the standouts within our apparel business was our champs sports private label performance within CSG.

Mary Dillon: In closing, we see a return to positive sales and comp growth in the quarter, as well as gross margin expansion as proof points that the laser plan is working.

Speaker Change: CSG composite it for the quarter and we have delivered a compelling assortment for the back of school season, including new active wear styles as well as new assortments and bottoms.

Frank Bracken: We're approaching the remainder of the year with confidence as our strategies are continuing to build momentum, and now let me hand it over to Frank to provide more details on our category and banner performance. Thank you, Mary, and good morning, everyone. Starting with second quarter product and brand partner performance, footwear comp to positive, high single digits. Within the basketball category, we continue to invest and see strength within our portfolio of next-gen signature athletes, like Nike, Sabrina, INSQ, Devon Booker, and John Moran, along with the Jordan athlete and NBA champion, Jason Tatum.

Speaker Change: Finally, our accessories business comes up mid-single digits, as we focus on our complementary socks, shoe care, and headwork categories, which is helping drive our UBT's and drive a creative merchandise margins.

Frank Bracken: Switching the channel performance, comparable sales in our stores increased 2%. While traffic was down year on year, we continued to see gains in conversion, as well as average ticket, including both positive AURs from greater full price selling, footwear penetration, and higher UBT's. Meanwhile, digital comps increased 4%. We saw growth again in our customer file in the quarter with both new and reactivated customers. We also delivered higher digital conversion levels for the quarter, as our efforts to improve the customer digital experience continue to take hold.

Speaker Change: Switching the channel performance.

Speaker Change: Comparable sales in our stores increased 2%.

Speaker Change: While traffic was down year on year, we continued to see gains in conversion, as well as average ticket, including both positive AURs from greater full price selling, footwear penetration and higher UPDs.

Frank Bracken: Next to that, we continue to drive energy and strong cell-thrues with the Adidas AE1 and the MBO3 from Kuma, as we remain confident in the diversity and energy of our signature basketball portfolio, and look forward to delivering even more innovation and excitement later this third quarter at the NBA season tips off. Importantly, the game of basketball and its influence continues to grow globally, as evidenced by the Olympic Games this past month.

Speaker Change: Meanwhile, Digital Combs increased 4%.

Speaker Change: We saw growth again in our customer file in the quarter with both new and reactivated customers.

Speaker Change: We also delivered higher digital conversion levels for the quarter, as our efforts to improve the customer digital experience continue to take hold.

Frank Bracken: And as Mary mentioned, we look forward to delivering our new digital app experience later this year, which will upgrade the shopping experience for our customers, as well as more seamlessly integrate our FLX program.

Speaker Change: and as Mary mentioned, we look forward to delivering our new digital app experience later this year, which will upgrade the shopping experience for our customers, as well as more seamlessly integrate our FLX program.

Frank Bracken: As the U.S, women's and men's team both won gold medals, the tournament demonstrated how global competitive, inclusive, and inspiring the sport has become, and the role it plays in driving both sport and culture across the globe. Within the culture of basketball, Nike's dunk and Air Force 1 and the Jordan AJ1 continue to be icons of the sneaker category, and remain among our most important franchises with consumers. Likewise, our Jordan Retro business continues to be a critical connection point to a new generation of consumers who celebrate basketball, culture, and street wear, and we saw strong cell-thrues as we exited the quarter and then the beginning of back to school.

Frank Bracken: Now for performance by banner and geography. In North America, overall comps were up 1.7%, led by Footlocker North America, which delivered a comp increase of 5.9%. With meaningful store refreshes completed and our inventory is well positioned, customers responded to our assortments and product flows at full price, particularly across women's, running, and the basketball categories. Our sustained brand building presence with our women's style campaign, our basketball activations with the clinic and summer hoops, and our marketing investments with sneaker season in July kept us top of mind throughout the quarter and headed into the early days of back to school.

Speaker Change: Now for Performance by Banner and Geography.

Speaker Change: In North America, overall comms were up 1.7% led by Footlocker North America, which delivered a pump increase of 5.9%.

Speaker Change: with meaningful store refreshes completed and our inventories well-positioned customers responded to our assortments and product flows at full price, particularly across women's running and the basketball categories.

Speaker Change: Our sustained brand-building presence with our women's style campaign, our basketball activations with the clinic and summer hoops, and our marketing investments with sneaker season in July kept us top of mind throughout the quarter and headed into the early days of back to school.

Frank Bracken: To ensure that footlocker stays at the forefront of the basketball category, we are thrilled to have opened our newest home court concept last week at our iconic 34-street footlocker store in New York City. Designed in partnership with the Nike and Jordan brands, this elevated basketball experience brings together the best of signature, lifestyle and retro basketball with one of a kind consumer experiences. This concept will serve as the blueprint moving forward as we are on the journey to deliver 100 home court experiences globally by 2026.

Frank Bracken: Kids' full locker comps were flat in the quarter, coming off a strong first quarter when we pulled forward receipts to match strong demand. It took some time to rebalance stock levels to fully meet demand here in the second quarter. We were able to partner with our vendors to ensure supply for the third quarter, and have seen a nice acceleration in the banner in August as a result, and believe we are well positioned for the balance of the... Here. A champ's sports, comps were down 3.9%, a nearly 10 point improvement from the first quarter results, as we're seeing signs of stabilization at the banner as its repositioning continues to take hold.

Speaker Change: Kidsville Locker Combs were flat in the quarter. Coming off a strong first quarter when we pulled four of receipts to match strong demand, it took some time to rebalance stock levels to fully meet demand here in the second quarter.

Speaker Change: We were able to partner with our vendors to ensure supply for the third quarter, and have seen a nice acceleration in the banner in August as a result, and believe we are well positioned for the balance of the year.

Speaker Change: A champ sports, cops were down 3.9% a nearly 10-point improvement from the first quarter results, as we're seeing signs of stabilization at the banner as its repositioning continues to take hold.

Frank Bracken: As Mary noted, champs generated positive footwear comps in the quarter. In fact, the top 25 doors of Champs comp positive overall in Q2, with particular strength in July store conversion, as assortments reflecting its updated sports style positioning really resonated. The champs team also continues to strengthen its brand partnerships and find differentiating consumer ideas to bring to market, under its Sport for Life brand platform. For instance, the Champ Sports Run Club continues to gain momentum as the team elevates the assortment and executes consumer activations, including our largest event to date, most recently with Nike. Additionally, the champs team has been partnering with Adidas to deliver on the cultural sport, and more specifically the look of soccer, including jerseys and jersey-inspired shirts, bottoms, and terrorist footwear.

Mary Dillon: As Mary noted, champs generated positive footwork comps in the quarter. In fact, the top 25 doors of champs comp positive overall in Q2, with particular strength in July store conversion as assortment's reflecting its updated sports style positioning really resonated.

Frank Bracken: It is believed as the undeniable destination for all things basketball. Turning to the lifestyle category, Adidas continues to lead the global terrorist trend, especially with our women's and kids consumers. Our business with Adidas strengthened in the second quarter as we flowed new colors and powerful retail stories through franchises such as the Samba, campus and gazelle. Our order book and go to market plans remain very strong as we go through the back to school time period and we are encouraged by the robust pipeline of innovation and creativity that Adidas has shared with us looking forward.

Speaker Change: The Chance team also continues to strengthen its brand partnerships and find differentiating consumer ideas to bring to market under its sport-for-life brand platform.

Speaker Change: For instance, the Champs Sports Run Club continues to game momentum as the team elevates the assortment and executes consumer activations, including our largest event to date most recently with Nike.

Frank Bracken: In lifestyle running, we continued our strong momentum with new balance through door expansions in women's and kids as well as like for like gains. Our partners at new balance continue to engage our shared consumers with strong product innovation, compelling assets and storytelling and operational excellence to help scale the business. With multiple footwear franchises connecting in the marketplace and a commitment to sport lifestyle and streetwear, we are confident that we will continue to grow with this important partner.

Speaker Change: Additionally, the Champs team has been partnering with Adidas to deliver on the culture of sport and more specifically the look of soccer, including jerseys and jersey inspired shirts, bottoms and terrorist footwear.

Speaker Change: And as I mentioned briefly before, the Chance CSG Sormon has helped deliver against consumer right trends, like lifestyle woven bottoms and active wear, which is proving to be a hit-with-consumers.

Speaker Change: With a strong back-to-school performance thus far, consumers are responding to chance-approved assortment, in-store presentation, and new brand-platform, giving us confidence that we have stabilized this critical banner.

Frank Bracken: Another strong brand that is leveraging its authenticity and running is ASICS. We are seeing strong global momentum with ASICS and multiple footwear franchises across men's, women's and kids. Next to that, Champs Sports has partnered with ASICS on their performance running line and also executed multiple run club events with consumers this year. With our partners at Nike, we continue to revitalize the Max Air business through their innovative platform dynamic air. And in the back half of this year, we will increase door count for Air Max DN across all genders and we are excited to flow new colors and stories into our business.

Frank Bracken: Moving to WSS, comps declined by 6.2% in the second quarter, as ongoing inflationary pressures continue to impact the discretionary spend of the WSS shopper, as reflected in shopping visits, especially in California. The WSS management team continues to focus on delivering compelling value and selection to their core consumer. However, as we navigate the challenging environment, we believe it's appropriate in the near term to reduce capital for new store openings at WSS, particularly given the strong returns we are seeing with new store concepts out of our other banners. As a result, our revised plan for 2024 now includes 13 new doors at WSS, down from 20, as we expected to temper our door growth plans in the near term until we see greater signs of consumer stabilization and recovery.

Speaker Change: Moving to WSS, Comst declined by 6.2% in the second quarter. As ongoing inflationary pressures continue to impact the discretionary spend of the WSS shopper, as reflected in shopping visits, especially in California.

Speaker Change: The WSS Management Team continues to focus on delivering compelling value and selection to their core consumer.

Speaker Change: However, as we navigate the challenging environment, we believe it's appropriate in the near-term to reduce capital for new store openings at WSS, particularly given the strong returns we are seeing with new store concepts out of our other banners.

Frank Bracken: Next to that, we continue to elevate our exclusive tuned air franchise globally investing in digital content, consumer experiences and elevated in store merchandising. We also saw momentum with Nike in our second quarter across heritage running franchises, including Vomero, V2K and P6000. Our door base and depth in these franchises is improving in our back to school selling period as well as the fourth quarter and we are pleased to dimensionalize the running business with them.

Speaker Change: As a result, our revised plan for 2024 now includes 13 new doors at WSS, down from 20. As we expect to temper our door growth plans in the near term until we see greater signs of consumer stabilization and recovery.

Frank Bracken: While we are taking this prudent approach in the near term, we still very much believe in opportunities for the banner longer term in serving the fastest growing consumer segment in the US.

Speaker Change: Well, we are taking this prudent approach in the near term. We still very much believe in opportunities for the banner longer term, in serving the fastest growing consumer segment in the U.S.

Frank Bracken: Turning to Europe, costs were up a strong 7.6%. The environment in Europe remains dynamic and somewhat promotional, especially within a peril, and we acknowledge there's more work to do in the region to drive greater levels of full-price sales. However, our teams in the region saw tremendous success in the quarter in engaging consumers through our store refresh program, as well as compelling brand campaigns, including our Summer of Sport campaign, celebrating the Euro Cup. And of course, the Olympics in France. With our Footlock or reimagined store in Paris opening in the quarter and a second in Europe coming later this fall, we are laying the groundwork for elevating the consumer experience along with our store refresh program.

Speaker Change: Turning to Europe, Comps were up a strong 7.6%

Frank Bracken: Within performance running, on and Hoka are continuing to bring new consumers into sneaker culture, especially women and kids. We grew with both of these brands and both a door and allocation basis in the second quarter, as we also see our retail banners as helping to introduce younger more multicultural consumers to their brands. And while the vulcanized footwear category remains challenged overall, we're seeing encouraging trends out of the vans brand, especially through their new school franchise.

Speaker Change: The environment in Europe remains dynamic and somewhat promotional, especially within a peril. And we acknowledge there's more work to do in the region to drive greater levels of full-price sales.

Speaker Change: However, our teams in the region saw tremendous success in the quarter in engaging consumers through our store refresh program, as well as compelling brand campaigns, including our summer of sport campaign, celebrating the Euro Cup, and of course the Olympics in France.

Frank Bracken: We are building our stock levels in this compelling franchise as we navigate the back half of the year, and we will continue to work with them to connect their classics and innovation to our consumer base. Finally, as we look ahead to the fall and holiday season, brands like Ugg will continue to be a larger part of our plans, especially for our female consumers. Next to that, we are excited for a strong boot season with Timberlin this fall and holiday, as they have done a tremendous job linking their iconic brand to fashion. We are excited for fashion and culture, driving great consumer anticipation this fall.

Speaker Change: with our Footlocker Reimagined Store in Paris opening in the quarter and a second in Europe coming later this fall. We are laying the groundwork for elevating the consumer experience along with our store refresh program.

Frank Bracken: Adam. Additionally, we continue to make progress with our new merchandising strategies and look forward to coming digital improvements that will elevate the digital experience. Finally, as mentioned, with the optimization of our footprint in the region, we can continue to focus more resources on the most meaningful European markets where we can drive sustainable and profitable growth.

Speaker Change: Additionally, we continue to make progress with our new merchandising strategies and look forward to coming digital improvements that will elevate the digital experience.

Speaker Change: Finally, as mentioned with the optimization of our footprint in the region, we can continue to focus more resources on the most meaningful European markets where we can drive sustainable and profitable growth.

Frank Bracken: In Asia-Pacific, Komp's were down 4.5 percent. At our Foot Locker banner, Komp's fell 2.2 percent, reflecting ongoing consumer challenges in the Australian marketplace from higher inflation. Encouragingly, we did see an improving trend as we move through the month of July. And finally, at Atmos, Komp's were down 9.6 percent. We're selecting our decision to accelerate shifts from less profitable third-party digital platforms to our own digital site. We will continue this shift into the back half of the year and come out of this with stronger first-party customer relationships and data.

Frank Bracken: Turning to the apparel business, challenges persisted with comps down mid teens. While the promotional environment and apparel remains difficult, we believe we can do more to stabilize the category with greater key item and sneaker connectivity, while also filling in gaps in our assortments with a compelling private label offering. One of the standouts within our apparel business was our Champs Sports Private Label Performance within CSG. CSG comp pausited for the quarter, and we have delivered a compelling assortment for the back to school season, including new active wear styles, as well as new assortments and bottoms. Finally, our accessories business comps up mid single digits as we focus on our complimentary socks, shoe care, and headwear categories, which is helping drive our UBT's and driver's creative merchandise margins.

Speaker Change: and Asia Pacific, comes for down 4.5%.

Speaker Change: At our Foot Locker banner, Com spell 2.2%, reflecting ongoing consumer challenges in the Australian Marketplace from higher inflation.

Speaker Change: Encouragingly, we did see an improving trend as we move through the month of July.

Speaker Change: and finally at Atmos, Combs were down 9.6%. Reflecting our decision to accelerate ships from less profitable, third-party digital platforms to our own digital site.

Speaker Change: We will continue this shift into the back half of the year and come out of this with stronger first-party customer relationships and data.

Frank Bracken: To conclude, we were pleased to deliver a strong second quarter led by our global Foot Locker and Kids Foot Locker banners. Our merchandising commercial teams are in sync and executing well with the support of our brand partners, leading to a solid back-to-school season thus far and giving us confidence as we look ahead to the holiday season.

Speaker Change: To conclude, we were pleased to deliver a strong second quarter, led by our global foot locker and kids football locker banners.

Speaker Change: Our merchandising, commercial teams are in sync and executing well with the support of our brand partners, leading to a solid back to school season thus far and giving us confidence as we look ahead to the holiday season.

Mike Bond: I'll now hand the call over to Mike to go over the financials and guidance in more detail. Thank you, Frank. Good morning, everyone. In the second quarter, starting with revenue, total sales increased 1.9 percent, led by Komp's up 2.6 percent, which was slightly ahead of our prior guidance of flat to up slightly. Total revenues included in a $11 million non-recurring charge associated with the rollout of the company's enhanced FLX program, which impacted our total sales line and not Komp's within the quarter. In terms of monthly cadence, Komp's improved as we move through the quarter, with May Komp's down low single digits, June Komp's up mid-single digits, and July the strongest month of the quarter with Komp's up mid-single digits and slightly ahead of June.

Speaker Change: I'll now hand the call over to Mike to go over the financials and guidance in more detail.

Mike: Thank you, Frank, and good morning, everyone. In the second quarter, starting with revenue, total sales increased 1.9% led by cops up to 2.6% which was slightly ahead of our prior guidance of flat to obslightly.

Speaker Change: Total revenues included an $11 million non-recurring charge associated with the roll-out of the company's enhanced FLX program, which impacted our total sales line and not comes within the quarter.

Speaker Change: In terms of monthly cadence, Compton proved as we move through the quarter, with May Combs down low single digits, June Combs up mid-single digits, and July the strongest month of the quarter with Combs up mid-single digits, and slightly ahead of June.

Frank Bracken: Now for performance by banner and geography. In North America, overall comps were up 1.7%, led by footlocker North America, which delivered a comp increase of 5.9%. With meaningful store refreshes completed and our inventory is well positioned, customers responded to our assortments and product flows at full price, particularly across women's, running, and the basketball categories. Our sustained brand building presence with our women's style campaign, our basketball activations with the clinic and summer hoops, and our marketing investments with sneaker season in July, kept us top of mind throughout the quarter and headed into the early days of back to school.

Mike Bond: Moving to margins, we were pleased to return to gross margin rate expansion in the quarter and accomplishing that while also improving our Komp trajectory. On a reported basis, gross margins for the quarter expanded 50 basis points to 27.6 percent. Mercedized margins were down 20 basis points; occupancy as a percent of sales levered 70 basis points on the positive Komp. To note, the quarter included an approximate 40 basis point impact related to the non-recurring FLX charge taken in the quarter. Excluding the FLX charge, gross margin increased approximately 90 basis points, including 20 basis points of merchandise margin expansion due to the reduced promotional levels year over year.

Speaker Change: Moving to margins, we are pleased to return to gross margin rate expansion in the quarter, and accomplishing that while also improving our Comprojectory.

Speaker Change: On a reported basis, gross margin for the quarter expanded 50 basis points to 27.6%.

Speaker Change: merchandise margins were down 20 basis points.

Speaker Change: occupancy as a percentage sales levered 70 basis points on the positive comp.

Speaker Change: To know it's the quarter included in approximate 40 basis point impact related to the non-recurring FLX charge taken in the quarter.

Speaker Change: Excluding the SLX charge, Gross Margin increased approximately 90 basis points.

Frank Bracken: Kids full locker comps were flat in the quarter, coming off a strong first quarter, when we pulled forward receipts to match strong demand, it took some time to rebalance stock levels to fully meet demand here in the second quarter. We were able to partner with our vendors to ensure supply for the third quarter, and have seen a nice acceleration in the banner in August as a result, and believe we are well positioned for the balance of the...

Speaker Change: and including 20 basis points of merchandise margin expansion due to the reduced promotional levels year over year.

Mike Bond: Approximately $10 million of gross margin savings from our cost optimization programs also flowed through our costs of good line. For the second quarter, our S&A rate came in at 25.1 percent, representing deloverage of 130 basis points. Investments in technology and brand building, as well as ongoing inflationary pressures, were partially offset by savings from the cost optimization program of approximately $10 million. $2 million. Collectively, our cost optimization program generated total savings of approximately $20 million in the second quarter. Finally, our earnings loss per share was 13 cents, and non-GAAP earnings per share landed at a loss of $0.5 per share.

Speaker Change: A approximately ten million dollars of gross margin savings from our cost optimization programs also flowed through our cost to good line.

Speaker Change: For the second quarter, our S.J.A. Rape came in at 25.1% representing the leverage of 130 basis points.

Frank Bracken: Here. A champ's sports, comps were down 3.9%, a nearly 10 point improvement from the first quarter results, as we're seeing signs of stabilization at the banner as its repositioning continues to take hold. As Mary noted, champs generated positive footwear comps in the quarter. In fact, the top 25 doors of champs comp positive overall in Q2, with particular strength in July store conversion, as assortments reflecting its updated sports style positioning really resonated.

Speaker Change: Investments in Technology and Brand Building, as well as ongoing inflationary pressures, were partially offset by savings from the cost optimization program of approximately $10 million.

Speaker Change: Collectively, our cost optimization program generated total savings of approximately $20 million in the second quarter.

Speaker Change: Finally, our earnings loss per share was 13 cents and non-gap earnings per share landed at a loss of 5 cents per share.

Mike Bond: Included in both our gap and non-GAAP earnings per share results was an approximate $0.9 impact from our non-recurring FLX charge. $299 million of cash and total debts of $445 million. At quarter end, inventories were down 10% versus last year as we remain committed to keeping our inventories controlled, flowing product to better match demand, and improving our inventory turns in 2024. Turning the cash flows, cash flow from operations was $68 million in the quarter, while capital expenditures were $56 million, yielding a positive free cash flow of $12 million in the second quarter, a significant improvement as compared to the prior year.

Speaker Change: Included in both our gap and non-gap earnings per share results was an approximate nine-cent impact from our non-recurring FLX charge.

Frank Bracken: The champs team also continues to strengthen its brand partnerships and find differentiating consumer ideas to bring to market, under its sport for life brand platform. For instance, the champ sports run club continues to gain momentum as the team elevates the assortment and executes consumer activations, including our largest event to date, most recently with Nike. Additionally, the champs team has been partnering with Adidas to deliver on the cultural sport, and more specifically the look of soccer, including jerseys and jersey inspired shirts, bottoms, and terrorist footwear.

Speaker Change: Turning to the balance sheet, we ended the quarter with $291 million of cash and total debts of $445 million.

Speaker Change: At quarterback, inventories were down 10% versus last year as we remain committed to keeping our inventories controlled, flowing product to better match demand and improving our inventory turns in 2024.

Speaker Change: Turning the cash flows, cash flow from operations was $68 million in the quarter, while capital expenditures were $56 million. Yielding a positive free cash flow of $12 million in the second quarter, a significant improvement as compared to the prior year.

Frank Bracken: And as I mentioned briefly before, the champ's CSG assortment has helped deliver against consumer right trends, like lifestyle woven bottoms and active wear, which is proving to be a hit with consumers. With a strong back to school performance thus far, consumers are responding to champs improved assortment, in store presentation, and new brand platform, giving us confidence that we have stabilized this critical banner. Moving to WSS, comps declined by 6.2% in the second quarter, as ongoing inflationary pressures continue to impact the discretionary spend of the WSS shopper as reflected in shopping visits, especially in California.

Mike Bond: We're pleased to see positive free cash flow in the quarter and remain on track to generate positive free cash flow for the year.

Speaker Change: We're pleased to see positive free cash flow in the quarter and remain on track to generate positive free cash flow for the year.

Mike Bond: Moving on to the changes to our international operations as well as our corporate footprint that were announced this morning. The further streamlining and optimization of our international footprint will impact approximately 30 stores and is expected to be completed by mid 2025. In 2023, these regions represented approximately 1% of global revenue and over $10 million in operating losses. In addition, we announced our intent to further optimize our corporate footprint by relocating our headquarters to St. Petersburg, Florida, in 2025, while maintaining only a limited presence in New York City going forward. We expect to combine savings from these actions to represent in over 20 basis point tailwind to evit margin into 2027 beyond before contemplating any added benefit from higher royalty revenues over time.

Speaker Change: Moving on to the changes to our international operations, as well as our corporate footprints that were announced this morning.

Speaker Change: The further streamlining and optimization of our international footprint will impact approximately 30 stores and is expected to be completed by mid 2025.

Speaker Change: In 2023, these regions represented approximately 1% of global revenue and over $10 million in operating losses.

Frank Bracken: The WSS management team continues to focus on delivering compelling value and selection to their core consumer. However, as we navigate the challenging environment, we believe it's appropriate in the near term to reduce capital for new store openings at WSS, particularly given the strong returns we are seeing with new store concepts out of our other banners. As a result, our revised plan for 2024 now includes 13 new doors at WSS down from 20, as we expected temper our door growth plans in the near term until we see greater signs of consumer stabilization and recovery. While we are taking this prudent approach in the near term, we still very much believe in opportunities for the banner longer term in serving the fastest growing consumer segment in the US.

Speaker Change: In addition, we announced our intent to further optimize our corporate footprint by relocating our headquarters to St. Petersburg, Florida in 2025.

Speaker Change: While maintaining only a limited presence in New York City going forward.

Speaker Change: We expect to combine safe things from these actions to represent in over 20 basis point tailwind to even margin in 227 beyond, before contemplating any added benefit from higher royalty revenues over time.

Mike Bond: On to our 2024 outlook. Given the strength of our first half results, we are reaffirming our full year non-GAAP EPS guidance of $1.50 to $1.70. We still expect full year comps of plus 1 to plus 3%. Given our solid second quarter trends in June and July, and supported by our performance through August, we still expect our comp momentum to build into the back half as our initiatives take hold. Overall, our store count will be down approximately 4% in 2024, with square footage down approximately 2%. We expect to open roughly 30 new stores in the year and to close approximately 140.

Speaker Change: on tour 2024 outlook.

Speaker Change: Given the strength of our first episodes, we are reaffirming our full year, non-gap, EPS guidance of a $1.52-$70.

Speaker Change: We still expect full-year camps of plus one to plus three percent.

Speaker Change: Given our solid second quarter trends in June and July, and supported by our performance through August, we still expect our complementary momentum to build into the back half as our initiatives take hold.

Speaker Change: Overall, our store count will be down approximately 4% in 2024, with square footage down approximately 2%.

Speaker Change: We expect to open roughly 30 new stores in the year and to close approximately 140.

Mike Bond: Including an approximate one point drag from lapping the extra week, total sales for 2024 are still expected to be down 1% to up 1%. On gross margin, we now expect gross margin expansion of 180 to 200 basis points to a rate of 29.5% to 29.7%. Down from our prior assumption of a 29.8% to 30% gross margin rate for the year. As we are seeing some promotional pressure in our international banners and in WSS, which we believe will impact the back. Half. On SNA, we expect due leverage between 140 and 160 basis points to a rate of 24.1 to 24.3 percent, better than the prior assumption of 24.4 to 24.6 percent.

Speaker Change: including an approximate one point drag from lapping the extra week, total sales for 2024 are still expected to be down 1% to up 1%.

Frank Bracken: And of course, the Olympics in France. With our footlock or reimagined store in Paris opening in the quarter and a second in Europe coming later this fall, we are laying the groundwork for elevating the consumer experience along with our store refresh program. Adam. Additionally, we continue to make progress with our new merchandising strategies and look forward to coming digital improvements that will elevate the digital experience. Finally, as mentioned, with the optimization of our footprint in the region, we can continue to focus more resources on the most meaningful European markets where we can drive sustainable and profitable growth.

Speaker Change: On Gross Margin, we now expect Gross Margin expansion of 180 to 200 basis points.

Speaker Change: to a rate of 29.5% to 29.7%. Down from our prior assumption of a 29.8% to 30% gross margin rate for the year. As we're seeing some promotional pressure in our international banners and in WSS, which we believe will impact the back-half.

Speaker Change: On SNA, we expect you leverage between 140 and 160 basis points to a rate of 24.1 to 24.3%. Better than the prior assumption of 24.4 to 24.6%.

Frank Bracken: In Asia-Pacific, Komp's were down 4.5 percent. At our Foot Locker Banner, Komp's fell 2.2 percent, reflecting ongoing consumer challenges in the Australian marketplace from higher inflation. Encouragingly, we did see an improving trend as we move through the month of July. And finally, at Atmos, Komp's were down 9.6 percent. We're selecting our decision to accelerate shifts from less profitable third-party digital platforms to our own digital site. We will continue this shift into the back half of the year and come out of this with stronger first-party customer relationships and data.

Mike Bond: While we are continuing our investments in technology, digital and brand building, we are finding efficiencies and managing our expenses in order to maintain our bottom line. As an organization, we are committed to optimizing our investment dollars and focusing on driving efficiency to deliver on our financial and strategic objectives. As a part of that, we remain committed to operational and investment management with a constant eye on maximizing returns, coupled with ongoing progress on our cost optimization program, through which we continue to target $80 million in savings this year. Switching to cash flows, our adjusted capital expenditure outlook for the year is now $330 million, down from our previous guidance of $345 million, largely from our reduction in new WSS stores this year.

Speaker Change: While we are continuing our investments in technology, digital and brand building, we are finding these efficiencies and managing our expenses in order to maintain our bottom line.

Speaker Change: As an organization, we are committed to optimizing our investment dollars and focusing on driving efficiency to deliver on our financial and strategic objectives.

Speaker Change: As a part of that, we remain committed to operational and investment management with a constant eye on maximizing returns. Coupled with ongoing progress on our cost optimization program through which we continue to target $80 million in savings this year.

Frank Bracken: To conclude, we were pleased to deliver a strong second quarter led by our global Foot Locker and Kids Foot Locker Banners. Our merchandising commercial teams are in sync and executing well with the support of our brand partners, leading to a solid back-to-school season thus far and giving us confidence as we look ahead to the holiday season.

Speaker Change: Switching to cash flows, our adjusted capital expenditure I'll look for the year is now $330 million. Down from our previous guidance of $345 million.

Speaker Change: Largely from our reduction in new WSS stores this year.

Mike Bond: It's important to note that the adjusted number includes approximately $55 million of IT investment that is not classified as CapEx from a GAAP perspective. Therefore, what will get reported in our CapEx line on our cash flow statement under investing activities will be approximately $275 million. The remaining $55 million represents software as a service implementation costs, a portion of which is being amortized this year and which is embedded in our 2024 S&A guidance. The balance that is not being amortized this year flows through our operating cash flows through the change in related asset accounts in our other net line item on the cash flow statement.

Speaker Change: It's important to note that the adjusted number includes approximately $55 million of IT investment that has not classified as cap X from a gap perspective.

Mike Bond: I'll now hand the call over to Mike to go over the financials and guidance in more detail. Thank you, Frank.

Mike Bond: Good morning, everyone. In the second quarter, starting with revenue, total sales increased 1.9 percent, led by Komp's up 2.6 percent, which was slightly ahead of our prior guidance of flat to up slightly. Total revenues included in a $11 million non-recurring charge associated with the rollout of the company's enhanced FLX program, which impacted our total sales line and not Komp's within the quarter. In terms of monthly cadence, Komp's improved as we move through the quarter, with May Komp's down low single digits, June Komp's up mid-single digits, and July the strongest month of the quarter with Komp's up mid-single digits and slightly ahead of June.

Speaker Change: Therefore, we'll get reported in our cappics line on our cash flow statement under investing activities will be approximately 275 million.

Speaker Change: The remaining 55 million represent software as a service implementation cost, a portion of which is being amortized this year and which is embedded in our 2024 S.J.A. guidance.

Speaker Change: The balance that is not being amortized this year flows through our operating cash flows through the change in related acid accounts in our other Ned's wine item on the cash flow statement.

Mike Bond: Taking a closer look at the back half, let me provide some additional detail on our expectations that will shape each quarter. On the top line, we expect comp momentum to continue to build as we move into the third and fourth quarters to reach our plus 1% to plus 3% comp gain for the year, with the third quarter and fourth quarter being at roughly equivalent positive comp levels. On gross margin, we expect gross margin expansion to ramp into the third quarter and even more so into the fourth quarter as we lap last year's higher mark downs, especially within a peril.

Speaker Change: Taking a closer look at the back half, let me provide some additional detail on our expectations that will shape each quarter.

Speaker Change: On the top line, we expect a momentum to continue to build as we move into the 3rd and 4th quarters to reach our plus 1% to plus 3% calm gain for the year. With the 3rd quarter and 4th quarter being at roughly equivalent positive comp levels.

Mike Bond: Moving to margins, we were pleased to return to gross margin rate expansion in the quarter and accomplishing that while also improving our Komp trajectory. On a reported basis, gross margins for the quarter expanded 50 basis points to 27.6 percent. Mercedized margins were down 20 basis points, occupancy as a percent of sales levered 70 basis points on the positive Komp. To note, the quarter included in approximate 40 basis point impact related to the non-recurring FLX charge taken in the quarter.

Speaker Change: Hi, Gross Margin, we expect Gross Margin expansion to ramp into the third quarter and even more so into the fourth quarter as we lab last year's higher markdowns, especially within a peril.

Mike Bond: On S&A, we expect de-leveraged year over year in both the third and fourth quarters. On a year-over-year percent change basis, we expect S&A dollar growth to be up in the low double digits in the third quarter and flat to slightly down in the fourth quarter when compared to last year's fourth quarter, inclusive of the extra week. For this reason, from an earnings perspective, we expect third quarter to be approximately 40 cents at the midpoint of our non-GAAP guidance range. Our strategies are building momentum as we move into the fall and holiday seasons, which is giving us confidence as we approach the remainder of the year in addition to our longer term targets.

Speaker Change: On Ashine, we expect to leverage over year in both the third and fourth quarters.

Speaker Change: On a year-over-year percent-change basis, we expect S-Shinai Dillon growth to be up in a low double digits in the third quarter, and flat to slightly down in the fourth quarter, and compared to last year's fourth quarter, inclusive of the extra week.

Mike Bond: Excluding the FLX charge, gross margin increased approximately 90 basis points, including 20 basis points of merchandise margin expansion due to the reduced promotional levels year over year. Approximately $10 million of gross margin savings from our cost optimization programs also flowed through our costs of good line. For the second quarter, our S&A rate came in at 25.1 percent, representing deloverage of 130 basis points. Investments in technology and brand building, as well as ongoing inflationary pressures, were partially offset by savings from the cost optimization program of approximately $10 million.

Speaker Change: For this reason from an earnings perspective, we expect third quarter to be approximately 40 cents at the midpoint of our non-gap guidance range.

Speaker Change: Our strategies are building momentum as we move into the fall on holiday seasons, which is giving us confidence as we approach the remainder of the year in addition to our longer term targets.

Operator: We look forward to updating you on our LASA progress next quarter, and with that operator, please open the call for questions.

Speaker Change: We look forward to updating you on our latest progress in the next quarter and with that, operator, please open the call for questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. And to withdraw your question, please press star, then two.

Speaker Change: Thank you, we will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then one on your touchstone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two. And our first question will come from Jeanine Sticter with BTIG, please go ahead.

Mike Bond: $2 million. Collectively, our cost optimization program generated total savings of approximately $20 million in the second quarter. Finally, our earnings loss per share was 13 cents and non-gap earnings per share landed at a loss of $0.5 per share. Included in both our gap and non-gap earnings per share results was an approximate $0.9 impact from our non-recurring FLX charge. $299 million of cash and total debts of $445 million. At quarter end, inventories were down 10% versus last year as we remain committed to keeping our inventories controlled, flowing product to better match demand and improving our inventory turns in 2024.

Janine Stichter: And our first question will come from Janine Stichter with BTIG.

Janine Stichter: Please go ahead. Hi, good morning. Thanks for taking my question and grasping all the progress. So by all accounts, the environment remains really tough, but we're seeing that you're accelerating comp, and you're also pulling back on promotions at the same time. Can you elaborate further on what you see as driving this? And then also curious, anything you're seeing in your consumer base, particularly with lower income consumer at UCWSS. Thank you. Thank you, Jeanine.

Jeanine Sticter: Thanks for taking my question, and I'm glad to know all the progress.

Jeanine Sticter: So by all accounts, you know, the environment remains really tough, but we're seeing that you're accelerating comp and you're also pulling back on promotions at the same time. Can you elaborate further on what you see is driving this? And then also curious, any things you're seeing in your consumer base, particularly with lower income consumer that you see at WSS. Thank you.

Mary Dillon: Well, first of all, yes, we're really pleased to be returning to positive total company comps and gross margin expansion as we're pulling back on promotions. And we've seen this broad base across all of our income cohorts, our regions, our formats. In fact, as we said to the script, our comp continue to improve through the quarter and continues as we get into back to school with strength. And in addition, our inventories are controlled. So, as we said, down 10% year over year. So net net, I would say, our execution is getting better and meeting customer needs.

Speaker Change: Thank you, Jenin. Well, first of all, yes, we're really pleased to be returning to positive total company, Comps and Gross Margin, expansion as we're pulling back on promotions and we've seen this broad base across all of our income cohorts.

Mike Bond: Turning the cash flows, cash flow from operations was $68 million in the quarter, while capital expenditures were $56 million, yielding a positive free cash flow of $12 million in the second quarter, a significant improvement as compared to the prior year. We're pleased to see positive free cash flow in the quarter and remain on track to generate positive free cash flow for the year.

Speaker Change: are regions, our formats, you know, in fact as we said of the script, our comp continue to improve through the quarter and it continues as we get into bat the school with strength.

Speaker Change: and in addition to our inventories, our control. So as we said, down 10% year over year. So that net, I would say, you know, our execution is getting better and meeting customer needs. And...

Mary Dillon: And to us, that's good evidence that the lace-up plan is working. On the consumer side, I would say it's an important category to our consumers. And they're prioritizing it right now as a discretionary category, with us having the right offerings at the right time for the key buying occasions they're responding. So whether it's the brands and products we're offering, often they're buying at full price. I reimagine a refreshed store experiences on the channel and digital and now effects loyalty. It's really bringing these all together at once. And for our customers, you know, we have a young, diverse customer base; really critical to the industry, frankly, because they're real trendsetters.

Mike Bond: Moving on to the changes to our international operations as well as our corporate footprint that were announced this morning. The further streamlining and optimization of our international footprint will impact approximately 30 stores and is expected to be completed by mid 2025. In 2023, these regions represented approximately 1% of global revenue and over $10 million in operating losses. In addition, we announced our intent to further optimize our corporate footprint by relocating our headquarters to St. Petersburg, Florida in 2025, while maintaining only a limited presence in New York City going forward. We expect to combine savings from these actions to represent in over 20 basis point tailwind to evit margin into 2027 beyond before contemplating any added benefit from higher royalty revenues over time.

Speaker Change: to us as good evidence that the lace-up plan is working. On the consumer side, I would say, it's an important category to our consumers, and they're prioritizing it right now as a discretionary category with us having the right offerings at the right time for the key buying occasions they're responding. So whether it's the brands and products we're offering, often they're buying a full price.

Speaker Change: Our reimagined and refreshed store experiences on the channel, and digital, and now FX loyalty, it's really bringing these all together at once. And for our customers, we have a young diverse customer base.

Speaker Change: really critical to the industry, frankly, because they're real trend setters. You know, they're often students or early in their career, so their discretionary spending is by definition limited, but I'd say, and also like all consumers, they have experienced pressure, it's from inflation, interest rate, et cetera. So again, as I said, this is a category they prioritize, and so for the right proposition at the right time, you know, our guests are showing up, and I think it's evidence in our positive.

Mary Dillon: You know, they're often students are early in their career, so their discretionary spending is, by definition, limited. But I'd say, and also like all consumers, they have experienced pressures from inflation, interest rate, etc. So again, as I said, this is the category they prioritize. And so for the right proposition at the right time, you know, our guests are showing up. And it's I think it's evidence in our comps and our positive AURs. And you know, I'd also note that our lace-up strategies are inviting new customers into our business. So we're increasing the percentage of women, you know, we're bringing in some higher-income customers as well as Gen Alpha shoppers.

Mike Bond: On to our 2024 outlook. Given the strength of our first half results, we are reaffirming our full year non-GAP EPS guidance of $1.50 to $1.70. We still expect full year comps of plus 1 to plus 3%. Given our solid second quarter trends in June and July and supported by our performance through August, we still expect our comp momentum to build into the back half as our initiatives take hold. Overall, our store count will be down approximately 4% in 2024 with square footage down approximately 2%.

Speaker Change: A-U-Rs.

Speaker Change: and you know, I also note that our lace of strategies are inviting new customers into our business. So we're increasing the percentage of women, you know, we're bringing in some higher income customers as well as Jenna Alpha Shopper. So in total, we think we've got a good handle on sort of showing up for our customers in the right way at the right time. You'll also ask about WSF and that's a household that I would say has even more pressure, a more concentration in the state like California. These are, you know, households that have multiple people in the household, so the discretion to their dollars go even, our have to be stretched even further. So that's why we're seeing more pressure with that customer side of the business.

Mary Dillon: So in total, we think we've got a good handle on sort of showing up for our customers in the right way at the right time.

Janine Stichter: You also ask about WSS. And that's a household that I would say has even more pressure, a more concentration in a state like California. These are, you know, households that have multiple people in the household, so the discretionary dollars go even or have to be stretched even further. So that's where I would see more pressure with that customer side of the business. Thank you. Perfect. Thanks very much.

Mike Bond: We expect to open roughly 30 new stores in the year and to close approximately 140. Including an approximate one point drag from lapping the extra week, total sales for 2024 are still expected to be down 1% to up 1%. On gross margin, we now expect gross margin expansion of 180 to 200 basis points to a rate of 29.5% to 29.7%. Down from our prior assumption of a 29.8% to 30% gross margin rate for the year.

Mike Bond: And then to follow up on the guidance, you called out SG&A upload double digits in Q3. Is there anything shifting there from Q2 or maybe out of Q4? Just wants to understand how to think about that. So I think it was a little bit higher than you had talked about previously. Yeah, Janine, this is Mike.

Speaker Change: Thank you.

Speaker Change: Thanks very much and this is a follow-up on the guidance. You called out S.H.U.N.A. up low, double-digit, thank you three. Is there anything shifting there from Q2 or maybe out of Q4? Just want to understand how to think about that because it's a little bit higher than you had talked about previously.

Mike Bond: So within Q3, a little bit of timing, just in terms of how the year flowed with some technology projects. It's not an indication of anything in terms of our progress within it, but just a little bit of timing within the expenses.

Speaker Change: Yeah, Genie, this is Mike, so within Q3, a little bit of timing just in terms of how the year flowed with some technology projects, it's not an indication of anything in terms of our progress within it, but just a little bit of timing within the expenses.

Mike Bond: As we are seeing some promotional pressure in our international banners and in WSS, which we believe will impact the back. Half. On SNA, we expect due leverage between 140 and 160 basis points to a rate of 24.1 to 24.3 percent, better than the prior assumption of 24.4 to 24.6 percent. While we are continuing our investments in technology, digital and brand building, we are finding efficiencies and managing our expenses in order to maintain our bottom line.

Mike Bond: And then, you know, for the year, we do think Q3 is sort of the peak at, you know, up double digits, but then we'll continue to make progress in Q4. Within Q4, we start to lap some of the brand building activities we have from a marketing perspective that really ramped up into Q4, and we start to anniversary that. So I will make some progress going forward.

Speaker Change: And then, you know, for the year, we do think Q3 is sort of the peak at, you know, up double digits. But then we'll continue to make progress in Q4. I was in Q4. We start to lap some of the brand building activities. We have from a marketing perspective that really ramped up in the Q4. And we start to anniversary that.

Janine Stichter: Thank you. Perfect, thanks so much.

Speaker Change: Oh, we'll make some progress going forward.

Mike Bond: As an organization, we are committed to optimizing our investment dollars and focusing on driving efficiency to deliver on our financial and strategic objectives. As a part of that, we remain committed to operational and investment management with a constant eye on maximizing returns, coupled with ongoing progress on our cost optimization program through which we continue to target $80 million in savings this year. Switching to cash flows, our adjusted capital expenditure outlook for the year is now $330 million, down from our previous guidance of $345 million, largely from our reduction in new WSS stores this year.

Speaker Change: Thank you so much.

Jonathan Komp: The next question will come from Jonathan Komp with Beard. Please, go ahead. Yeah, good morning.

Speaker Change: The next question will come from Jonathan Comp with Beard, please go ahead.

Alex Conway: This is Alex Conway on for John. Could you just walk through the thought process a little bit behind some of the decisions involving the international operation with the plans to close South Korea and the Nordics and then converting Greece and Romania? Sure, Alex. Thank you for the question. You know, I would step back and say that we're always evaluating the business and all levers that we have to pull in service of achieving the lace-up plan as strategic and financial goals. And for us, the key theme has been simplification and optimization, as that allows us to continue to focus on both being a global brand, but also focus in on the core market spanners that we think really will drive our future.

Alex Conway: Yeah, good morning. This is Alex Conway on for John. Can you just walk through the thought process a little bit behind some of the decisions involving the international operation with the plans to close South Korea and Nordics and then converting the police in Romania?

Speaker Change: Sure, Alex, thank you for the question, you know, I would step back and say that we're always evaluating the business and all levers that we have to pull and service of achieving the lace-up plan as strategic and financial goals.

Speaker Change: and for us, the key theme has been simplification and optimization, as that allows us to continue to focus on both being a global brand, but also focusing on the core market spanners that we think really will drive our future. So, you know, the lenses that we use are, you know, things like size and scale of a market, it's growth potential profitability, whether that's current or future potential. Certainly fit within the consumer side, customer segment priorities, we've identified, and of course, you know, where we believe we'll get the best return on capital versus other investments. So, you know, these are not decisions that we take lightly. If that's in all of these markets, we have really terrific striper teams that have done a really fantastic job. But that said, the decisions on market, so for example, Korea, you know,

Mike Bond: It's important to note that the adjusted number includes approximately $55 million of IT investment that is not classified as CapEx from a gap perspective. Therefore, what will get reported in our CapEx line on our cash flow statement under investing activities will be approximately $275 million. The remaining $55 million represents software as a service implementation costs, a portion of which is being amortized this year and which is embedded in our 2024 S&A guidance. The balance that is not being amortized this year flows through our operating cash flows through the change in related asset accounts in our other net line item on the cash flow statement.

Mary Dillon: So, you know, the lenses that we use are, you know, things like size and scale of a market, its growth potential, profitability, whether that's current, their future potential, certainly fit within the consumer side, customer segment priorities we've identified. And of course, you know, where we believe we'll get the best return on capital versus other investments. So, you know, these are not decisions that we take lightly. If that in all of these markets, we have really terrific stripper teams that have done a really fantastic job. But that said, the decisions on markets. So, for example, Korea, you know, growth potential.

Mary Dillon: Yes, but more challenge on profitability for us. And the Nordics was more about size and scale. And lower growth potential. Whereas Southeast Europe, you know, we do feel there's good potential there across the screens that we've used, but better served. We think with a capital, with a partner in terms of their capital and execution efficiency. So, so we feel good about where we sit on the portfolio today, but we will certainly continue to value away from time to time. Yeah, thank you. That's helpful.

Speaker Change: Growth Potential, yes, but more challenge on profitability for us, and the Nordics was more about size and scale and lower growth potential, whereas Southeast Europe, you know, we do feel there's good potential there across the screen that we've used, but better serve we think with a capital, with a partner in terms of their capital and execution efficiency. So, so we feel good about where we sit on the portfolio today, but we will certainly continue to evaluate from time to time.

Mike Bond: And then might just quickly on the gross margin guidance, you called out the headwinds and WSS and international.

Speaker Change: Yeah, thank you. That's helpful. And then might just quickly on the gross margin guy, and you called out the headwinds and WSS and international, should we take that to me in that but locker U.S. margins are kind of tracking as you plan and just any more color on that line would be helpful. Thank you.

Mike Bond: Should we take that to mean that blocker US margins are kind of tracking as you planned, and just any more color on that line would be helpful. Thank you. Sure. So, you know, we think through the gross margin guidance, you know, just want to call out that, you know, while we are adjusting it down slightly. Still forecasting and projecting a meaningful acceleration in our gross margin rate year over year in both Q3 and Q4. We did call out the additional markdowns needed, concentrated in international and WSS. So I think we do feel good about how the North American promotional environment and our margin progression is occurring in our North American banners outside of WSS.

Mike Bond: On S&A, we expect de-leveraged year over year in both the third and fourth quarters. On a year over year percent change basis, we expect S&A dollar growth to be up in the low double digits in the third quarter and flat to slightly down in the fourth quarter when compared to last year's fourth quarter inclusive of the extra week. For this reason, from an earnings perspective, we expect third quarter to be approximately 40 cents at the midpoint of our non-gap guidance range. Our strategies are building momentum as we move into the fall and holiday seasons, which is giving us confidence as we approach the remainder of the year in addition to our longer term targets.

Speaker Change: Sure, so we think through the gross margin guidance, you know, just want to call out that, you know, while we are adjusting it down slightly, still forecasting and projecting a meaningful acceleration in our gross margin rate year over year in both Q3 and Q4.

Speaker Change: We did call out the additional markdowns needed, concentrated in international and WSS. So I think we do feel good about how the North American promotional environment and our margin progression is occurring in our North American banners outside of WSS.

Operator: We look forward to updating you on our LASA progress next quarter and with that operator, please open the call for questions. Thank you.

Mike Bond: You know, as we look to the back half, you know, it's really the European environment still remains tougher, and we're seeing emotional activity and a peril in particular for us to be competitive there. And then at WSS, that consumer still remains in a tougher spot, so we're having to lean into a greater value messaging to drive demand. And I think importantly, both company-wide and for these regions and banners in particular, we feel good about our inventory levels. You know, Mary called out down 10% for the year. We'd expect inventories to remain in the down six to down 10% range as we go into Q3, which is where we've been operating at Q1 and Q2 levels.

Speaker Change: You know, as we look to the back-of, you know, it's really the European environment, so remains tougher and we're seeing emotional activity in a peril in particular for us to be competitive there. And then at WSS, that consumer still remains in a tougher spot, so we're having to lean into a greater value messaging to drive demand.

Operator: We will now begin the question and answer session. To ask a question, you may press star than one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two.

Janine Stichter: And our first question will come from Janine Stichter with BTIG. Please go ahead. Hi, good morning. Thanks for taking my question and grasping all the progress. So by all count, the environment remains really tough, but we're seeing that you're accelerating comp and you're also pulling back on promotions at the same time. Can you elaborate further on what you see as driving this? And then also curious, anything you're seeing in your consumer base, particularly with lower income consumer that you see at WSS. Thank you. Thank you, Janine.

Speaker Change: I think importantly, both company-wide and for these regions and banners in particular. We feel good about our inventory levels, you know, Mary called out down 10% for the year. We'd expect the inventory to remain in the down 60-down 10% range as we go into Q3.

Speaker Change: which has been operating at Q1 and Q2 levels. So again, you know, feel really good about the progress we're making in terms of gross margin rate expansion, but acknowledging some additional pressure in a couple of markets.

Mike Bond: So, you know, again, you know, feel really good about the progress we're making in terms of gross margin rate expansion, but acknowledging some additional pressure in a couple of months.

Mary Dillon: Well, first of all, yes, we're really pleased to be returning to positive total company. [inaudible] of work to do. We've got a lot of work to do. [inaudible] Thank you. Perfect, thanks so much.

Adrienne Yih: The next question will come from Adrienne Y. with Barclays. Please go ahead. Great. Let me add my congrats on the progress. I guess my first question is, you know, the move to St. Pete's.

Speaker Change: The next question will come from Adrian, why with Barclays, please go ahead.

Adrian: Great, let me add my congrats on the progress.

Adrian: I don't think my first question is...

Mary Dillon: I'm wondering if you can talk to us about kind of where the distribution of kind of human capital, human resources are. Obviously, there in New York now, the design and the marketing team, how they get down there, and then what does remain sort of in the New York market.

Adrian: You know, the move to St. Pete, I'm wondering if you can talk to us about kind of where the distribution of

Speaker Change: Kind of human capital human resources are obviously there in New York now, the design and the, you know, the, the more team how they get down there.

Speaker Change: and then what does remain sort of in the New York market? Then secondarily, when we talk about the inventory just to follow up on that, when you're looking at spring season and the buying of inventory as we enter 2025, when do you kind of open up that open to buy to give these?

Mike Bond: And then secondarily, when we talk about the inventory, just to follow up on that, when you're looking at spring season and the buying of inventory as we enter 2025, when do you kind of open up that open divide to give the kind of give a more oxygen to pop acceleration? Totally understand that you're sort of playing it very disciplined, but just wondering what that happens in spring of next year. Thank you very much. Thank you, Adrienne.

Speaker Change: to give a little more oxygen to do complex elaborations, totally understand that you're sort of playing at very disciplined, but just wondering whether that happens in spring of next year. Thank you very much.

Mary Dillon: I'll start on the corporate headquarters. So thank you for asking. You know, what this really does is build on what already is a very meaningful commercial and executive team presence in the St. Pete market. We have a large center of gravity. There are ready, you know, historically, that was originally the headquarters of Champ Sporting Goods. So we have a large concentration of folks. There are ready and we think it's a great place for us to continue to grow and do business and continue to track top talent. We will maintain a limited presence only in New York, but we will have a presence connecting us to sneaker culture, sports, and fashion.

Speaker Change: Thank you, Adrian. I'll start on the corporate headquarters.

Speaker Change: So thank you for asking, you know what this really does is build on what a ready is a very meaningful, commercial and executive team presence in the St. Pete market. We have a large center of gravity. There are ready historically that was originally the headquarters of champs sporting goods. So we have a large concentration of folks that are ready and we think it's a great place for us to get to new to grow and do business and continue to track top talent. We will maintain a limited presence only in New York but we will have a presence connecting us to sneaker culture.

Mary Dillon: You know, we think this is going to continue to give us better opportunities both for further collaboration across the business, and there's some financial benefits over time as well. It will be effective late 2025. We wanted to give some visibility to this now. One other thing I've noticed: we're not requiring relocation, so we really think we'll be able to attract or retain our great talent. The details of, you know, what departments where we're still working through, but generally speaking, it's kind of a move to enhance the center of gravity we have already well maintaining a presence in New York.

Speaker Change: Sports, fashion. You know, we think this is going to continue to give us better opportunities both for further collaboration across the business and there's some financial benefits over time as well. It'll be effective late 2025. We wanted to give some visibility to this now. One of the things I've noticed, we're not requiring relocation, so we really think we'll be able to track or retain our great talent. The details of, you know, wood departments where we're still working through, but generally speaking it's kind of a move to enhance the center of gravity we have already. We'll help maintaining a presence in the York.

Mary Dillon: Thank you for your help.

Mike Bond: Yeah, and then just following up on the inventory question around spring and 25. So we're certainly planning for growth across the enterprise and 25, at the same time, wanting to maintain the good inventory discipline as we look for margin recovery. So certainly there are, you know, some brands that we've talked about in previous calls. I'm sure we'll come up that we're planning aggressive growth with. We're also, you know, do have the opportunity as our inventories are clean to be opportunistic and pull forward as we see, you know, beats to our sales plans. Some of our partners also take some, some inventory positions on some key items that we're able to draw upon within the season.

Speaker Change: Thank you for helping me. And then just following up on the inventory question around spring and 25, so we're certainly planning for growth across the enterprise and 25 at the same time wanting to maintain the good inventory discipline as we look for margin recovery.

Speaker Change: So, certainly there are some brands that we've talked about in previous calls, I'm sure we'll come up that we're planning to address a growth with. We're also, you know, do have the opportunity as our inventories are clean to the opportunistic and pull forward as we see, you know, beats to our sales plans.

Speaker Change: Some of our partners also take some inventory positions on some key items that we're able to draw upon within the season. And then some of the key franchises are also on replenishment programs and allow us to draw down inventory. So those are some of the mechanisms that we use to try and accelerate the business and when there's some tailwinds there.

Paul Lewis: And then some of the key franchises are also on replenishment programs and allow us to draw down inventory. So those are some of the mechanisms that we use to try and accelerate the business, and when there's some tailwinds there. Great. Thank you very much. Best of luck. Thank you.

Speaker Change: Great. Thank you very much. That's the black.

Mary Dillon: The next question will come from Paul Lewis with City. Please go ahead. Hey, guys. You mentioned the business strengthen during the quarter. I'm curious if you could talk about the promotions and how they turned it during the quarter. If you had to pull any promotional lovers specifically in the America's business. And then taking a few piece of multiple might be plays in the third quarter quarter sales plan. It's got things. Sure. Well, let me just say that, actually, I think it's evidenced by our, our comp results in our AUR improvements. It actually had been pulling back on promotions, particularly in North America.

Speaker Change: Thank you.

Speaker Change: The next question will come from Paul Louis with City, please go ahead.

Jonathan Komp: The next question will come from Jonathan Komp with Beard. Please, go ahead. Yeah, good morning. This is Alex Conway on for John.

Paul Louis: Hey, there's guys. You mentioned the business strengthened during the quarter. It's curious to be able to talk about the promotions and how they turned it during the quarter.

Mary Dillon: Could you just walk through the thought process a little bit behind some of the decisions involving the international operation with the plans to close South Korea and Nordics and then converting Greece and Romania? Sure, Alex. Thank you for the question. You know, I would step back and say that we're always evaluating the business and all levers that we have to pull and service of achieving the lace-up plan as strategic and financial goals.

Paul Louis: and during the quarter if you had to pull any promotional efforts specifically.

Speaker Change: in the American business. And then, technically, we talked about the most mighty plays in the third quarter, fourth quarter sales plan we've got. Thanks.

Speaker Change: [inaudible]

Mary Dillon: And for us, the key theme has been simplification and optimization as that allows us to continue to focus on both being a global brand, but also focus in on the core market spanners that we think really will drive our future. So, you know, the lenses that we use are, you know, things like size and scale of a market, it's growth potential profitability, whether that's current, their future potential, certainly fit within the consumer side, customer segment priorities we've identified.

Mary Dillon: So, the strengthening of our comp is really, has really been driven by the confluence of all of the things that we're bringing together at once on our business. So, you know, just to add to that, I'd say we saw the business strengthen through the quarter and continue into August as we start back to school, and that gives us confidence as we get into the second half of the year because improvements were broad-based and really a function of all the initiatives coming together. You know, we know there's still some uncertainty out there for our customer, but, you know, coming ahead, we still, you know, for the rest of the year, we're going to continue to scale things like the improved store experience, digital loyalty, kind of just getting started on our relaunch.

Speaker Change: has really been driven by the compliments of all of the things that we're bringing together at once on our business. So, you know, just to add to that, I'd say we saw the business strengthen through the quarter and continue into August as we start back to school and that gives us confidence.

Speaker Change: as we get into the second half of the year because improvements were broad-based and really a function of all the initiatives coming together. You know, we know there's still some certainty out there for our customer, but you know, coming ahead, we still, you know, for the rest of the year, we're going to continue to scale things like the improved storage, experience, digital, loyalty kind of just getting started on our relaunch. That'll all continue to scale into the second half of the year, including holiday. We mentioned on the script, we'll be launching our new mobile app and returning it to growth with Nike in the fourth quarter. And we feel really good about the order book and, you know, the launch calendar. That in conjunction with our inventories being well controlled, we think is also a lot of flexibility. So I guess headline being less rely on a promotion and more about, you know, leading.

Mary Dillon: And of course, you know, where we believe we'll get the best return on capital versus other investments. So, you know, these are not decisions that we take lightly. If that in all of these markets, we have really terrific stripper teams that have done a really fantastic job. But that said, the decisions on markets. So, for example, Korea, you know, growth potential. Yes, but more challenge on profitability for us. And the Nordics was more about size and scale.

Mary Dillon: That'll all continue to scale into the second half of the year, including holiday. We mentioned on the script, we'll be launching our new mobile app and returning to growth with Nike in the fourth year. And we feel really good about the order book and, you know, the launch calendar. That, in conjunction with our inventories being well-controlled, we think it's a lot of flexibility. So, I guess headline being less rely on a promotion and more about, you know, leading through the lace up plan and playing our offense. With Nike, your question, you know, I would just start by saying that I feel very good about our partnership and the momentum on the business.

Mary Dillon: And lower growth potential. Whereas Southeast Europe, you know, we do feel there's good potential there across the screens that we've used, but better served. We think with a capital, with a partner in terms of their capital and execution efficiency. So, so we feel good about where we sit on the portfolio today, but we will certainly continue to value away from time to time. Yeah, thank you. That's helpful.

Speaker Change: in the meeting through the lace-up plan and playing our offense.

Speaker Change: with Nike, your question, you know, I would just start by saying that feel very good about our partnership and the momentum on the business. We've been saying this for a while that we really focused together on the areas that are very specific to both of our businesses, which is leading a basketball kids and sneaker culture. We gave some examples on the call about great collaboration that we're doing across our businesses, whether it's the home court, you know, which is really about bringing the ultimate global, multi-branded experience and basketball to our stores together in collaboration with Nike and Jordan Brand, and then the clinic, which is really about, you know, taking the MBA to the community level and creating the next generation of Hooper. So there's a lot happening between our businesses and we feel good about the fact that we will be returning to...

Mary Dillon: We've been saying this for a while, that we really focus together on the areas that are very specific to both of our businesses. Which is leading a basketball kids and sneaker culture. We gave some examples on the call about great collaboration that we're doing across our businesses. Whether it's the home court, you know, which is really about bringing the, you know, ultimate global multi-branded experience and basketball tour stores together in collaboration with Nike and Jordan Brand. And then the clinic, which is really about, you know, taking the NBA to the community level and creating the next generation of hoopers.

Mike Bond: And then might just quickly on the gross margin guidance, you called out the headwinds and WSS and international. Should we take that to mean that blocker US margins are kind of tracking as you planned and just any more color on that line would be helpful. Thank you. Sure. So, you know, we think through the gross margin guidance, you know, just want to call out that, you know, while we are adjusting it down slightly.

Mike Bond: Still forecasting and projecting a meaningful acceleration in our gross margin rate year over year in both Q3 and Q4. We did call out the additional markdowns needed, concentrated in international and WSS. So I think we do feel good about how the North American promotional environment and our margin progression is occurring in our North American banners outside of WSS. You know, as we look to the back half, you know, it's really the European environment still remains tougher and we're seeing emotional activity and a peril in particular for us to be competitive there.

Mary Dillon: So, there's a lot happening between our businesses. And we feel good about the fact that we will be returning to growth in the fourth quarter and feel good about the composition of our order book.

Speaker Change: in the fourth quarter and feel good about the composition of our order book.

Michael Bonetti: Thank you.

Speaker Change: Thank you, Dillon.

Michael Bonetti: The next question will come from Michael Bonetti with Evercore ISI. Please go ahead. Thanks for taking our question here.

Speaker Change: Thank you.

Speaker Change: See you next question. We'll come from Michael Bennetting with Evercore ISI. Please go ahead.

Michael Bonetti: I guess I just want to ask one more time on the second half, gross margin reduction. You mentioned the promotions in international sounded like it was largely due to a peril. Is there anything beyond that? Any issues with deliveries or red C disruptions to know about the person some other brands trying to, I guess, gauge whether those issues are, are fairly transitory. And if you're seeing that gross margin pressure in third quarter to date.

Michael Bennetting: Thanks for taking our question here. I guess I just want to ask one more time on the second half gross margin reduction. You mentioned the promotions in an international. Sounded like it was largely due to a peril. Is there anything beyond that any issues with?

Mike Bond: And then at WSS that consumer still remains in a tougher spot, so we're having to lean into a greater value messaging to drive demand. And I think importantly, both company wide and for these regions and banners in particular, we feel good about our inventory levels, you know, Mary called out down 10% for the year. We'd expect inventories to remain in the down six to down 10% range as we go into Q3, which is where we've been operating at Q1 and Q2 levels. So, you know, again, you know, feel really good about the progress we're making in terms of gross margin rate expansion, but acknowledging some additional pressure in a couple of months.

Speaker Change: Deliveries, Red Sea disruptions, you know about those person to some other brands, trying to engage whether those issues are fairly transitory and as you're seeing that gross margin pressure in third quarter to date.

Mike Bond: And then also what the opportunity is from a cost perspective on the headquarters move or the $1 contribution from the Asia and Europe transitions.

Speaker Change: And then also what the opportunity is from a cost perspective on the headquarters move or the E.V. dollar contribution from the Asia and Europe transitions.

Frank Bracken: Hey, Michael. This is Frank. I'll take the first part of that around Europe and then pass it to Mike on the cost question. So, yeah, I mean, certainly, as I think you know, there's a lot of regulations around pricing and promotion periods in Europe. And so when we're on promotion, we really have to be sharp in terms of what the consumers are responding to as well as the competitive dynamics. And that's part of the challenge: operating the business there. That said, there are probably some pockets of peril inventory where we're still working through some of those challenges.

Speaker Change: Hey, Michael, this is Frank. I'll take the first part of that around Europe and then pass it to Mike on the cost question.

Mike: Yeah, I mean, certainly as you, I think, you know, there's a lot of regulations around pricing and promotion periods in Europe and so, you know, when we're on promotion, we really have to be sharp in terms of what the consumers responding to as well as the competitive dynamics and that's, you know, part of the challenge.

Adrienne Yih: The next question will come from Adrienne Y with Barclays. Please go ahead. Great. Let me add my congrats on the progress. I guess my first question is, you know, the move to St. Pete's.

Mike: operating the business there. That said, there are probably some pockets of peril inventory where we're still working through some of those challenges and then I'd say the other thing is...

Frank Bracken: And then I'd say the other thing is France as a whole was a little more disappointing in the quarter than we had planned. And so there's a little bit of the inventory that we plan to sell through that we've got to work through here as we get to the back-to-school season in terms of deliveries. Q2 was largely normalized. We did see at the end of July and into August some disruption from Red Sea shipments, and that's affecting all brands sort of equally. So we're working through very closely with our partners to get that supply chain normalized as best possible and get new receipts into the business.

Mary Dillon: I'm wondering if you can talk to us about kind of where the distribution of kind of human capital, human resources are obviously there in New York now, the design and the the marketing team, how they get down there, and then what does remain sort of in the New York market. And then secondarily, when we talk about the inventory, just to follow up on that, when you're looking at spring season and the buying of inventory as we enter 2025, when do you kind of open up that open divide to give the kind of give a more oxygen to pop acceleration, totally understand that you're sort of playing it very disciplined, but just wondering what that happens in spring of next year. Thank you very much. Thank you, Adrienne.

Mike: France as a whole was a little more disappointing in the quarter than then we had planned and so there's a little bit of the inventory that we had planned to sell through that we've got to work through here as we get to the back to school season.

Mike: In terms of deliveries, Q2 was largely normalized, we did see at the end of July and in the August some disruption from Red Sea shipments and that's...

Mike: you know affecting all brands sort of equally. So we're working through very closely with our partners to to get that supply chain normalized as best possible and get new receipts into the business. So it's not something that we're flagging is a real risk to the quarter and you know holding our guidance in our forecast on the business there, but certainly something we're monitoring closely.

Frank Bracken: So it's not something that we're flagging as a real risk to the quarter and holding our guidance and our forecast on the business there, but certainly something we're monitoring closely.

Mike Bond: So I'll turn it over to Mike. Hey Michael this Mike.

Mary Dillon: I'll start on the corporate headquarters. So thank you for asking, you know, what this really does is build on what already is a very meaningful commercial and executive team presence in the St. Pete market. We have a large center of gravity. There are ready, you know, historically, that was originally the headquarters of champ sporting goods. So we have a large concentration of folks there are ready and we think it's a great place for us to continue to grow and do business and continue to track top talent.

Mike Bond: So from a ultimate financial benefits tied to both the corporate headquarters inclusive of the other changes that we're making within the international business. You know, as we normalize that into 2027, it'll be worth, you know, 20 basis points of EBIT margin expansion or just above that. And that's before we incorporate additional potential upside from royalty revenues from the new partnership as well. And then just to just add on to the margin improvement question, I think as we look at year to date, you know within the quarter specifically in Q2, as the sales improved to the mid single digit levels.

Mike: I'll turn it over to Michael. Hey Michael, this is Mike, so from an ultimate financial benefits tied to both the corporate headquarters, inclusive of the other changes that we're making within the international business.

Michael Bennetting: As we normalize that into 2027, it'll be worth 20 basis points of EBIT, margin expansion, or just above that. And that's before we incorporate additional potential upside from royalty revenues from the new partnership.

Mary Dillon: We will maintain a limited presence only in New York, but we will have a presence connecting us to sneaker culture, sports, fashion. You know, we think this is going to continue to give us better opportunities both for further collaboration across the business and there's some financial benefits over time as well. It will be effective late 2025. We wanted to give some visibility to this now. One other thing I've noticed, we're not requiring relocation, so we really think we'll be able to attract or retain our great talent.

Michael Bennetting: as well.

Speaker Change: and then just to add on to the margin improvement question, I think as we look at year-to-date within the quarter specifically in Q2, as the sales improved to the mid-single-digit levels, we did see margin rates accelerate, margin rate improvement accelerates in that time period, which is a trend now that we've seen going back into the later part of Q1.

Mike Bond: We did see margin rate accelerate; margin rate improvement accelerates in that time period, which is a trend now that we've seen going back into the later part of Q1. And we've also seen that trend continue here in August. So you know all that's been incorporated into our thinking for the adjustments in the back half. here.

Mary Dillon: The details of, you know, what departments where we're still working through, but generally speaking, it's kind of a move to enhance the center of gravity we have already well maintaining a presence in New York. Thank you for your help.

Speaker Change: and we've also seen that trend continue here in D'August so all that's been incorporated into our thinking for the adjustments in the back half the year.

Michael Bonetti: Okay, thanks a lot, guys.

Anna Andreeva: The next question will come from Anna and Dreeva with Piper Sandler. Please go ahead. Great, thanks so much.

Speaker Change: Okay, thank you all guys.

Mike Bond: Yeah, and then just following up on the inventory question around spring and 25. So we're certainly planning for growth across the enterprise and 25 at the same time wanting to maintain the good inventory discipline as we look for margin recovery. So certainly there are, you know, some brands that we've talked about in previous calls. I'm sure we'll come up that we're planning aggressive growth with. We're also, you know, do have the opportunity as our inventories are clean to the opportunistic and pull forward as we see, you know, beats to our sales plans.

Speaker Change: In the next question, we'll come from Anna and Driva with Piper Sandler. Please go ahead.

Anna Andreeva: Good morning. Congrats on making progress. Two quick ones from us. I wanted to follow up on the guide. So, with 40 cents guided for the third quarter, there's a pretty big ramp expected in the fourth quarter to get to the annual guidance range. So can you talk about the confidence levels to get there? Should we think that as GNA decline is the biggest component within that? And secondly, it sounds like the loyalty program is resonating, which is great. I think you said penetration was up to 100 basis points in a short period of time. How should we think about that penetration ramping as we go through the year?

Anna Driva: Great, thanks so much, good morning and congrats on making progress.

Speaker Change: Two quick ones from us. I wanted to follow up on the guide, so with 40 cents guided for the third quarter. There's a pretty big ramp expected in the fourth quarter to get to the annual guidance range.

Speaker Change: So, can you talk about the confidence level to get there? Could we think that, as GNA decline, is the biggest component within that? And secondly, it sounds like the loyalty program is resonating to the great. I think you said penetration was up to a hundred basis points.

Mike Bond: Some of our partners also take some, some inventory positions on some key items that we're able to draw upon within the season. And then some of the key franchises are also on replenishment programs and allow us to draw down inventory. So those are some of the mechanisms that we use to try and accelerate the business and when there's some tailwinds there. Great. Thank you very much. Best of luck.

Speaker Change: in the short period of time. How should we think about that penetration ramping as we go through the year? Thanks so much.

Mary Dillon: Thanks so much.

Mary Dillon: Well, maybe I'll just start on loyalty. Yeah, we're really pleased with the launch, and it's going to continue to ramp. I mean, our goal was to get to 50% in a couple of years, and we're, you know, we're already gotten to 24% capture rate, as you've seen. So that'll continue to ramp. And, you know, I'll just say that really we're really pleased with the program. It is broadly appealing. It's cash for points and other perks, plus we keep the launch access. And, you know, some of the things that we've seen is, you know, an increase in the pace of enrollments, higher engagement with first-time redeemers.

Speaker Change: Well, maybe I'll just start in loyalty. Yeah, we were really pleased with the launch and it's going to continue to ramp. I mean, our goal was to get to 50% in a couple of years and we're, you know, we're already gotten to 24% capture rate as you've seen. So that'll continue to ramp.

Paul Lejuez: Thank you. The next question will come from Paul Lewis with city. Please go ahead. Hey, guys. You mentioned the business strengthen during the quarter. I'm curious if you could talk about the promotions and how they turned it during the quarter. If you had to pull any promotional lovers specifically in the America's business. And then taking a few piece of multiple might be plays in the third quarter quarter sales plan. It's got things.

Speaker Change: and I'll just say that really we're really pleased with it. The program is broadly appealing, it's cash for points, and other perks, plus we keep the launch access. And some of the things that we've seen is an increase in the pace of enrollment, higher engagement with first time Redeemer, so people have had points and now have a reason to engage.

Mary Dillon: So people have had points, and now have a reason to engage. And then all the metrics that we really think are important, of course. So spend, remember, driven by increased frequency, higher units per transaction, higher average order value. So all on track for us to continue to achieve the ramp and achieve a lot of term goals there. And then just from the Q3, Q4 perspective, you know, the SNA improvement is obviously a contribution to that. I would not dimensionalize it as the biggest one. You know, I think as we go through there, we do lamp in increasingly promotional time for us as we go into Q3 and Q4 and Q4 specifically where we took a lot of specific actions last year to make sure that we got through the year with a clean inventory level.

Speaker Change: and then all the metrics that we really think are important of course so spend per member driven by increased frequency, higher units per transaction, higher average order value. So all on track for us to continue to achieve to ramp and achieve a longer term goal there.

Mary Dillon: Sure. Well, let me just say that, actually, I think it's evidence by our, our comp results in our AUR improvements. It actually had been pulling back on promotions, particularly in North America. So, the strengthening of our comp is really, has really been driven by the confluence of all of the things that we're bringing together at once on our business. So, you know, just to add to that, I'd say we saw the business strengthen through the quarter and continue into August as we start back to school and that gives us confidence as we get into the second half of the year, because improvements were broad-based and really a function of all the initiatives coming together.

Speaker Change: And then just from the Q3Q4 perspective, you know, the SGA improvement is obviously a contribution to that. I would not have to mention that as the biggest one, you know, I think as we go through there, we do lamp in increasingly promotional time for us as we go into Q3 and Q4 and Q4 specifically where we took a lot of specific actions last year to make sure that we got through the year with a clean inventory level.

Mary Dillon: You know, we know there's still some uncertainty out there for our customer, but, you know, coming ahead, we still, you know, for the rest of the year, we're going to continue to scale things like the improved store experience, digital loyalty, kind of just getting started on our relaunch. That'll all continue to scale into the second half of the year, including holiday. We mentioned on the script, we'll be launching our new mobile app and returning to growth with Nike in the fourth year.

Mary Dillon: We do expect loyalty to ramp as we go through the back part of the year. We do expect refresh activity to ramp as we go into the back part of the year. And, you know, I think we've got in Q4 then our app launch return to growth with Nike. And, you know, I think all that's incorporated how we thought about the flow between Q3 and Q4.

Speaker Change: We do expect loyalty to ramp as we go through the back part of the year. We do expect refresh activity to ramp as we go into the back part of the year.

Speaker Change: and you know I think we've got in Q4 then our app launch returned to growth with Nike and you know I think all that's incorporated and we saw it about the flow between Q3 and Q4.

Mary Dillon: And we feel really good about the order book and, you know, the launch calendar. That in conjunction with our inventories being well-controlled, we think it's a lot of flexibility. So, I guess headline being less rely on a promotion and more about, you know, leading through the lace up plan and playing our offense.

Anna Andreeva: All right, very helpful. That's a lot.

Operator: Thank you.

Speaker Change: Alright, very helpful. That's a lot.

Mary Dillon: This concludes our question and answer session.

Speaker Change: Thank you. Thank you.

Mary Dillon: I would like to turn the conference back over to Ms. Mary Dylan for any closing remarks. Please go ahead, ma'am. Thanks, everybody, for joining us today. I remain confident that our decisions and our strategies of the right actions to put Footlocker on the continued path towards sustainable growth and enhance shareholder value. Our teams are executing well as we head into the peak back to school season. And I just want to send my thanks to the entire Footlocker team, especially our global stripper community, for their passion and commitment to ensuring we have a great back to school season across our stores, online and our distribution centers.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Miss Mary Dillon for any closing remarks. Please go ahead, ma'am.

Mary Dillon: With Nike, your question, you know, I would just start by saying that feel very good about our partnership and the momentum on the business. We've been saying this for a while, that we really focus together on the areas that are very specific to both of our business. Which is leading a basketball kids and sneaker culture. We gave some examples on the call about great collaboration that we're doing across our businesses. Whether it's the home court, you know, which is really about bringing the, you know, ultimate global multi branded experience and basketball tour stores together in collaboration with Nike and Jordan brand.

Mary Dillon: Thanks everybody for joining us today. I remain confident that our decisions and our strategies are the right actions to put foot locker on the continue path towards sustainable growth and enhanced shareholder value. Our teams are executing well as we head into the peak back to school season. And I just want to send my thanks to the entire foot locker team, especially our global striper community, for their passion and commitment to ensuring we have a great back to school season across our stores, online and our distribution centers. I look forward to our team week next month and celebrating all of our key accomplishments with all of you.

Mary Dillon: And then the clinic, which is really about, you know, taking the NBA to the community level and creating the next generation of Hoopers. So, there's a lot happening between our businesses. And we feel good about the fact that we will be returning to growth in the fourth quarter and feel good about the composition of our order book.

Michael Bonetti: Thank you.

Mary Dillon: I look forward to our team week next month and celebrating all of our key accomplishments with all of you. We look forward to updating you on our progress next quarter. So, thank you.

Mary Dillon: We look forward to updating on our progress next quarter. So thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Speaker Change: The conference is now concluded, thank you for attending today's presentation. You may now disconnect.

Operator: You may now disconnect.

Frank Bracken: The next question will come from Michael Bonetti with Evercore ISI. Please go ahead. Thanks for taking our question here. I guess I just want to ask one more time on the second half, gross margin reduction. You mentioned the promotions in international sounded like it was largely due to a peril. Is there anything beyond that? Any issues with deliveries or red C disruptions to know about the person some other brands trying to, I guess, gauge whether those issues are, are fairly transitory.

Frank Bracken: And if you're seeing that gross margin pressure in third quarter to date. And then also what the opportunity is from a cost perspective on the headquarters move or the $1 contribution from the Asia and Europe transitions. Hey, Michael. This is Frank. I'll take the first part of that around Europe and then pass it to Mike on the on the cost question. So, yeah, I mean, certainly as I think you know, there's a lot of regulations around pricing and promotion periods in Europe.

Frank Bracken: And so when we're on promotion, we really have to be sharp in terms of what the consumers responding to as well as the competitive dynamics. And that's part of the challenge, operating the business there. That said, there are probably some pockets of peril inventory where we're still working through some of those challenges. And then I'd say the other thing is France as a whole was a little more disappointing in the quarter than we had planned.

Frank Bracken: And so there's a little bit of the inventory that we plan to sell through that we've got to work through here as we get to the back to school season in terms of deliveries. Q2 was largely normalized. We did see at the end of July and into August some disruption from Red Sea shipments and that's affecting all brands sort of equally. So we're working through very closely with our partners to get that supply chain normalized as best possible and get new receipts into the business.

Frank Bracken: So it's not something that we're flagging is is a real risk to the to the quarter and holding our guidance and our forecast on the business there, but certainly something we're monitoring closely. So I'll turn it over to Mike. Hey Michael this Mike. So from a ultimate financial benefits tied to both the corporate headquarters inclusive of the other changes that we're making within the international business. You know as we normalize that into 2027 it'll be worth you know 20 basis points of EBIT margin expansion or just above that.

Frank Bracken: And that's before we incorporate additional potential upside from royalty revenues from the new partnership as well. And then just to just add on to the margin improvement question I think as we look at year to date, you know within the quarter specifically in Q2 as the sales improved to the mid single digit levels. We did see margin rate accelerate margin rate improvement accelerates in that time period, which is a trend now that we've seen going back into the later latter part of Q1. And we've also seen that trend continue here in August. So you know all that's been incorporated into our thinking for the adjustments in the back half, here.

Anna Andreeva: Okay, thanks a lot, guys. The next question will come from Anna and Dreeva with Piper Sandler. Please go ahead. Great, thanks so much. Good morning. Congrats on making progress. Two quick ones from us. I wanted to follow up on the guide. So with 40 cents guided for the third quarter, there's a pretty big ramp expected in the fourth quarter to get to the annual guidance range. So can you talk about the confidence levels to get there?

Anna Andreeva: Should we think that as GNA decline is the biggest component within that? And secondly, it sounds like the loyalty program is resonating, which is great. I think you said penetration was up to 100 basis points in a short period of time. How should we think about that penetration ramping as we go through the year? Thanks so much.

Mary Dillon: Well, maybe I'll just start on loyalty. Yeah, we're really pleased with the launch and it's going to continue to ramp. I mean, our goal was get to 50% in a couple of years and we're, you know, we're already gotten to 24% capture rate as you've seen. So that'll continue to ramp. And, you know, I'll just say that really we're really pleased with the program is broadly appealing. It's cash for points and other perks plus we keep the launch access.

Mary Dillon: And, you know, some of the things that we've seen is, you know, an increase in the pace of enrollments, higher engagement with first-time redeemers. So people have had points and now have a reason to engage. And then all the metrics that we really think are important, of course. So spend, remember, driven by increased frequency, higher units per transaction, higher average order value. So all on track for us to continue to achieve the ramp and achieve a lot of term goals there.

Mary Dillon: And then just from the Q3, Q4 perspective, you know, the SNA improvement is obviously a contribution to that. I would not dimensionalize it as the biggest one. You know, I think as we go through there, we do lamp in increasingly promotional time for us as we go into Q3 and Q4 and Q4 specifically where we took a lot of specific actions last year to make sure that we got through the year with a clean inventory level.

Operator: This concludes our question and answer session.

Mary Dillon: I would like to turn the conference back over to Ms. Mary Dylan for any closing remarks. Please go ahead, ma'am. Thanks, everybody, for joining us today. I remain confident that our decisions and our strategies of the right actions to put footlocker on the continued path towards sustainable growth and enhance shareholder value. Our teams are executing well as we head into the peak back to school season. And I just want to send my thanks to the entire footlocker team, especially our global stripper community for their passion and commitment to ensuring we have a great back to school season across our stores online and our distribution centers. I look forward to our team week next month and celebrating all of our key accomplishments with all of you. We look forward to updating you on our progress next quarter. So, thank you.

Operator: The conference is now concluded.

Operator: Thank you for attending today's presentation.

You may now disconnect.

Q2 2024 Foot Locker Inc Earnings Call

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