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FOOT LOCKER,INC. ACCELERATING GLOBAL GROWTH 2004 ANNUAL REPORT $1.64$1.64 $1.40 2004 $5.4 billion 2003 $1.10 2002 $4.8$4.8 billionbillion $0.77 $0.77 eps 2000 2001 $4.5 billion sales $4.4 billion $4.4$4.4 billionbillion FOOT LOCKER,INC. About the Company Foot Locker, Inc. (NYSE: FL) is the world's leading Additionally, the Company's Footlocker.com/Eastbay retailer of athletic footwear and apparel. Headquartered business operates a rapidly growing direct-to-customers in New York City, it operates approximately 4,000 ath- business offering athletic footwear, apparel and equip- letic retail stores in 18 countries in North America, ment through its Internet and catalog channels. Europe and Australia under the brand names Foot Locker, Footaction, Lady Foot Locker, Kids Foot Locker and Champs Sports. Table of Contents Shareholders’ Letter 2 Business Overview 5 Foot Locker 6 Champs Sports 8 Footaction 9 Lady Foot Locker/Kids Foot Locker 10 Footlocker.com/Eastbay 11 Corporate Philanthropy 12 Form 10-K 13 Board of Directors, Corporate Management, Division Management, Corporate Information IBC Cover image illustrates Sales and Diluted EPS from Continuing Operations. Financial Highlights (Millions, except per share amounts) 2000 2001 2002 2003 2004 Sales $ 4,356 $ 4,379 $4,509 $ 4,779 $ 5,355 Total operating profit $ 182 $ 197 $ 269 $ 342 $ 389 Income from continuing operations $ 107 $ 111 $ 162 $ 209 $ 255 Diluted EPS from continuing operations $ 0.77 $ 0.77 $ 1.10 $ 1.40 $ 1.64 Cash, cash equivalents and short-term investment position, net of debt $ (204) $ (184) $ — $ 112 $ 131 Athletic Stores Sales Income from Continuing Operations Per Average Gross Square Foot (millions) (dollars) $345 $255 $335 $209 $316 $162 $306 $111 $301 $107 ‘00 ‘01 ‘02 ‘03 ‘04 ‘00 ‘01 ‘02 ‘03 ‘04 Operating Profit Diluted EPS from Continuing Operations (millions) (dollars) $389 $1.64 $342 $1.40 $269 $1.10 $197 $182 $0.77 $0.77 ‘00 ‘01 ‘02 ‘03 ‘04 ‘00 ‘01 ‘02 ‘03 ‘04 1 SHAREHOLDERS’LETTER This past year was significant not just for our strong financial results, but also for our strategic accomplishments. In many respects, 2004 was a milestone 2004 Year in Review flow that we are carefully redeploying to year for our Company, from celebrating Earlier this decade, the Company estab- deliver increased value for our sharehold- th the 30 anniversary of the opening of our lished two key financial objectives: ers by: first Foot Locker store in City of Industry, increasing our annual sales per average California, to opening our first Foot gross square foot to $350 and reaching an • Investing in worldwide growth Locker store in the Republic of Ireland. It operating profit margin of 8.5 percent. • Enhancing the productivity of existing was also a year of continued momentum We made significant strides towards businesses and strong financial performance for our attaining these objectives in 2004 – • Strengthening our balance sheet Company. The progress we made in 2004, achieving annual sales per average gross • Providing a meaningful cash return to including our expanded global store base square foot of $345 and an operating our shareholders and improved array of merchandise, posi- profit margin of 7.3 percent – and believe tions us for additional success in the these goals are within our grasp. As a future. result, we are now targeting our longer- Investing in our Worldwide Growth The year 2004 can be summarized as term goal of a 10 percent operating prof- This past year was significant not just for follows: our sales broke through the it margin, a goal we aim to achieve with- our strong financial results, but also for $5 billion mark and, by year's end, we in the next several years. our strategic accomplishments. First and were operating nearly 4,000 stores world- Our confidence is underpinned by the foremost, investing in meaningful world- wide. Moreover, Foot Locker, Inc. signifi- financial results that we have delivered. wide growth for our Company is essential cantly increased its net income per share Our sales increased significantly in 2004, to our future. and increased shareholder value by using reaching $5.4 billion, a 12 percent In 2004, we completed the acquisition its strong cash flow to reinvest in the increase from $4.8 billion in 2003. More of two important businesses – the 349- business and pay increased dividends. In importantly, income from continuing store Footaction chain in the United addition, most of our key financial meas- operations increased 22 percent in 2004 States, and 11 athletic stores in the urements – including sales per average to $255 million. Republic of Ireland. We expect the finan- gross square foot, operating profit, net Disciplined fiscal management cial returns from these acquisitions to income and shareholders' equity – have remains a cornerstone of our strategy. We exceed our cost of capital by a meaning- increased meaningfully. Our pride in our continue to strengthen our financial posi- ful margin and profits to be accretive to consistent and improving results is tion while building our Company's future earnings per share in 2005 and beyond. matched by our total dedication to and our shareholders' returns. The The Footaction brand, which is well enhancing value for our shareholders over Company ended 2004 in a strong financial known across the United States, is antic- the long term. position, with total cash and short-term ipated to be complementary to our exist- investments of $492 million. Our busi- ing businesses and important in generat- nesses continue to generate strong cash ing top-line growth. Footaction's value to 1974 1977 1979 • First Foot Locker store • First Foot Locker • 139 Foot Locker stores. opens in Puente Hills commercial airs. Mall in City of Industry, California. • Foot Locker Cross Country Championships founded. 2 Gross Square Footage Store Summary 2004 2005 January 31, January 29, Remodeled/ Average Total Targeted 2004 Acquired Opened Closed 2005 Relocated Size (thousands) Openings Foot Locker 1,448 — 20 40 1,428 138 4,100 5,809 35 Footaction — 349 4 4 349 6 4,800 1,683 20 Lady Foot Locker 584 — 2 19 567 22 2,200 1,265 5 Kids Foot Locker 357 — 1 12 346 10 2,400 837 5 Foot Locker International 640 11 64 8 707 9 2,800 2,013 25 Champs Sports 581 — 5 16 570 40 5,600 3,173 10 Total 3,610 360 96 99 3,967 225 3,700 14,780 100 our Company has been enhanced through ed ourselves on providing best-in-class percentage of sales. Our success in meet- the successful integration of its operation customer service. During 2004, we took ing this objective resulted from the col- into the Foot Locker infrastructure. several steps to enhance our future com- lective efforts of our associates world- We are also excited about our expan- parable-store sales by implementing new, wide. We are committed to an ongoing sion into the Republic of Ireland, the 14th and improving existing, programs effort aimed at containing the growth of European country in which we operate designed to attract new customers while our operating expenses to a rate below retail stores. We believe Europe continues better serving existing ones. These initia- that of our sales increases. to offer the most exciting opportunities tives include a new loyalty card program, for sales and profit growth over the next enhanced gift card presentations and an Strengthening our Balance Sheet several years, and as a result, we plan to automated stock-locator system, each of Another ongoing key objective has been continue opening new Foot Locker stores which were intregrated within the new strengthening our Company's financial in strategic locations across this region. point-of-sale system that we finished position in an effort to achieve an invest- Looking farther afield, we believe that installing in our U.S. stores this year. ment-grade credit rating. We have made the Asia/Pacific region presents an excel- Meeting the needs of our customers great strides towards this objective in lent opportunity for growth over the also depends on providing an attractive 2004: longer term. store environment in a convenient loca- tion. During 2004, Foot Locker, Inc. com- • $150 million of 5.5% convertible Productivity Enhancements pleted over 750 real estate projects. notes were converted to equity These projects included acquiring 360 Aggressive global growth was only part of • Federal income tax return examina- stores, opening 96 new stores in strong the bigger picture. We also continued to tions through fiscal 2003 were com- consumer markets, closing 99 underper- focus on implementing several strategies pleted, resulting in a $47 million forming older stores, and relocating and designed to enhance the sales and profits reduction of income tax liabilities remodeling 225 stores to right-size and of our existing businesses. These ongoing enhance their appearance. We have also • The Company's underfunded pension productivity enhancements are aimed at worked with our landlords to optimize the liability was reduced by $71 million the compatible goals of driving increased tenancy-cost structure of additional • $200 million revolving credit facility sales per average gross square foot and stores. As a result, our total occupancy was amended and restated, with its decreasing the Company's operating costs, as a percentage of sales, decreased term extended to 2009 expenses as a percentage of sales. versus last year. Our success as a retailer depends on • New five-year, $175 million term loan In 2004, we also continued to work meeting the needs and wants of our cus- was negotiated with our existing bank aggressively toward reducing our selling, tomers. We at Foot Locker have long prid- group general and administrative expenses as a 1984 1986 • Champs Sports is acquired.

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