FOOT LOCKER, INC. Business Overview
Foot Locker, Inc. leads the celebration of sneaker and youth culture around the globe through a portfolio of brands includingFoot Locker ,Lady Foot Locker , Kids Foot Locker,Champs Sports ,Eastbay , atmos, WSS, Footaction, and Sidestep. As ofJuly 30, 2022 , we operated 2,799 primarily mall-based stores, as well as stores in high-traffic urban retail areas and high streets, in 28 countries acrossthe United States ,Canada ,Europe ,Australia ,New Zealand , andAsia , as well as websites and mobile apps. Our purpose is to inspire and empower youth culture around the world, by fueling a shared passion for self-expression and creating unrivaled experiences at the heart of the global sneaker community. We use our omni-channel capabilities to bridge the digital world and physical stores, including order-in-store, buy online and pickup-in-store, and buy online and ship-from-store, as well as e-commerce. We operate websites and mobile apps aligned with the brand names of our store banners includingfootlocker.com , kidsfootlocker.com, champssports.com, atmosusa.com, shopwss.com and related e-commerce sites in the various international countries that we operate. These sites offer some of the largest online product selections and provide a seamless link between e-commerce and physical stores. We also operate the website for eastbay.com. Store Count
At
Franchise Operations
A total of 148 franchised stores were operating atJuly 30, 2022 , as compared with 142 and 134 stores atJanuary 29, 2022 andJuly 31, 2021 , respectively, operating in theMiddle East andAsia . Revenue from franchised stores was not significant for any of the periods presented. These stores are not included in the operating store count above.
COVID-19 Update
We continue to monitor outbreaks of COVID-19 which cause store closures, reduced operating hours, capacity limitations, and social distancing that may be required to help ensure the health and safety of our team members and our customers. COVID-19 has had, and may continue to have, an effect on ports and trade, as well as global travel.
Reconciliation of Non-GAAP Measures
In addition to reporting our financial results in accordance withU.S. generally accepted accounting principles ("GAAP"), we report certain financial results that differ from what is reported under GAAP. We have presented certain financial measures identified as non-GAAP, such as sales changes excluding foreign currency fluctuations, adjusted income before income taxes, adjusted net income, and adjusted diluted earnings per share.
We present certain amounts as excluding the effects of foreign currency fluctuations, which are also considered non-GAAP measures. Where amounts are expressed as excluding the effects of foreign currency fluctuations, such changes are determined by translating all amounts in both years using the prior-year average foreign exchange rates. Presenting amounts on a constant currency basis is useful to investors because it enables them to better understand the changes in our business that are not related to currency movements.
Second Quarter 2022 Form 10-Q Page 20
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These non-GAAP measures are presented because we believe they assist investors
in comparing our performance across reporting periods on a consistent basis by
excluding items that we do not believe are indicative of our core business or
affect comparability. In addition, these non-GAAP measures are useful in
assessing our progress in achieving our long-term financial objectives. We
estimate the tax effect of all non-GAAP adjustments by applying a marginal tax
rate to each of the respective items. The income tax items represent the
discrete amount that affected the period. The non-GAAP financial information is
provided in addition to, and not as an alternative to, our reported results
prepared in accordance with GAAP.
Effective with the first quarter of 2022, the calculation for non-GAAP earnings
excludes gains and losses from all minority investments, including the
adjustments related to the investment in Retailors, Ltd. We believe this is a
more representative measure of our recurring earnings, assists in the
comparability of results, and is consistent with how management reviews
performance. The non-GAAP results for 2021 have been recast, as applicable, to
conform to the current year's presentation. As we report quarterly results
through 2022, we will provide updated non-GAAP reconciliations for the
corresponding prior year's quarter under this revised definition.
Presented below is a reconciliation of GAAP and non-GAAP.
Thirteen weeks ended Twenty-six weeks ended
July 30, July 31, July 30, July 31,
($ in millions, except per
share amounts) 2022 2021 2022 2021
Pre-tax income:
Income before income taxes $ 143 $ 587 $ 333 $ 871
Pre-tax amounts excluded from
GAAP:
Impairment and other charges 12 36 18 40
Other income / expense, net (6) (320) 18 (320)
Adjusted income before income
taxes (non-GAAP) $ 149 $ 303 $ 369 $ 591
After-tax income:
Net income attributable to Foot
Locker, Inc. $ 94 $ 430 $ 227 632
After-tax adjustments excluded
from GAAP:
Impairment and other charges,
net of income tax benefit of
$3 , $9 , $5 , and $10 ,
respectively 9 27 13 30
Other income / expense, net of
(expense)/income tax benefit of
$(3) , $(84) , $3 , and $(84) ,
respectively (3) (236) 15 (236)
Tax reserves charge 5 - 5 -
Adjusted net income (non-GAAP) $ 105 $ 221 $ 260 426
Earnings per share:
Diluted earnings per share $ 0.99 $ 4.09 $ 2.36 6.02
Diluted EPS amounts excluded
from GAAP:
Impairment and other charges 0.09 0.25 0.14 0.28
Other income / expense, net (0.03) (2.25) 0.16 (2.25)
Tax reserves charge 0.05 - 0.05 -
Adjusted diluted earnings per
share (non-GAAP) $ 1.10 $ 2.09 $ 2.71 4.05
During the thirteen and twenty-six weeks ended
Second Quarter 2022 Form 10-Q Page 21
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The adjustments made to other income / (expense), net reflect gains or losses primarily associated with our minority investments. See the Other Income / (Expense), net section for further information.
In the second quarter of 2022, we recorded a
Segment Reporting
We have determined that we have three operating segments,North America , EMEA, andAsia Pacific . OurNorth America operating segment includes the results of the following banners operating in theU.S. andCanada :Foot Locker , Kids Foot Locker,Lady Foot Locker ,Champs Sports , WSS, and Footaction, including each of their related e-commerce businesses, as well as ourEastbay business. Our EMEA operating segment includes the results of the following banners operating inEurope :Foot Locker , Sidestep, and Kids Foot Locker, including each of their related e-commerce businesses. OurAsia Pacific operating segment includes the results of theFoot Locker banner and its related e-commerce business operating inAustralia ,New Zealand , andAsia , as well as atmos, which operates primarily inAsia . We have further aggregated these operating segments into one reportable segment based upon their shared customer base and similar economic characteristics.
Results of Operations
We evaluate performance based on several factors, primarily the banner's financial results, referred to as division profit. Division profit reflects income before income taxes, impairment and other charges, corporate expenses, non-operating income, and net interest expense.
The table below summarizes our results.
Thirteen weeks ended Twenty-six weeks ended
July 30, July 31, July 30, July 31,
($ in millions) 2022 2021 2022 2021
Sales $ 2,065 $ 2,275 $ 4,240 $ 4,428
Operating Results
Division profit 184 332 444 647
Less: Impairment and other
charges (1) 12 36 18 40
Less: Corporate expense (2) 33 32 70 61
Income from operations 139 264 356 546
Interest expense, net (5) (2) (10) (4)
Other income / (expense), net
(3) 9 325 (13) 329
Income before income taxes $ 143 $ 587 $ 333 $ 871 (1) See the Impairment and Other Charges section for further information.
Corporate expense consists of unallocated selling, general and administrative
expenses as well as depreciation and amortization related to the Company's (2) corporate headquarters, centrally managed departments, unallocated insurance
and benefit programs, certain foreign exchange transaction gains and losses,
and other items.
Other income / (expense), net includes non-operating items, franchise royalty
income, changes in fair value of minority interests measured at fair value or
using the fair value measurement alternative, changes in the market value of (3) our available-for-sale security, our share of earnings or losses related to
our equity method investments, and net benefit expense related to our pension
and postretirement programs excluding the service cost component. See the
Other income / (expense), net section for further information.
Second Quarter 2022 Form 10-Q Page 22
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Sales
All references to comparable-store sales for a given period relate to sales of
stores that were open at the period-end and had been open for more than
one year. The computation of consolidated comparable sales also includes our
direct-to-customers channel. Stores opened or closed during the period are not
included in the comparable-store base; however, stores closed temporarily for
relocation or remodeling are included. Stores that were temporarily closed due
to the COVID-19 pandemic are also included in the computation of
comparable-store sales. Computations exclude the effect of foreign currency
fluctuations.
Sales from acquired businesses that include inventory are included in the
computation of comparable-store sales after 15 months of operations.
Accordingly, sales of WSS and atmos have been excluded from the computation of
comparable-store sales. As a result of the Eastbay Team Sales divestiture, sales
from this business were removed for the computation of comparable sales for all
periods.
The information shown below represents certain sales metrics by sales channel.
Thirteen weeks ended Twenty-six weeks ended
July 30, July 31, July 30, July 31,
($ in millions) 2022 2021 2022 2021
Stores
Sales $ 1,716 $ 1,817 $ 3,492 $ 3,437
$ Change $ (101) $ 55
% Change (5.6) % 1.6 %
% of total sales 83.1 % 79.9 % 82.4 % 77.6 %
Comparable sales (decrease) increase (6.0) % 28.4 % 0.5 % 54.0 %
Direct-to-customers
Sales $ 349 $ 458 $ 748 $ 991
$ Change $ (109) $ (243)
% Change (23.8) % (24.5) %
% of total sales 16.9 % 20.1 17.6 % 22.4 %
Comparable sales decrease (26.7) % (35.1) (28.3) % (8.2) %
For the thirteen weeks ended July 30, 2022 , total sales decreased by $210
million , or 9.2%, to $2,065 million , as compared with the corresponding
prior-year period. For the twenty-six weeks ended July 30, 2022 , total sales
decreased by $188 million , or 4.2%, to $4,240 million , as compared with the
corresponding prior-year period. Excluding the effect of foreign currency
fluctuations, total sales decreased by $139 million , or 6.1%, for the thirteen
weeks ended July 30, 2022 , and decreased by $76 million , or 1.7%, for the
twenty-six weeks ended July 30, 2022 . Sales from our acquired WSS and atmos
banners were $137 million and $48 million , respectively, for the thirteen weeks
ended July 30, 2022 , and $275 million and $101 million , respectively for the
twenty-six weeks ended July 30, 2022 . The information shown below represents
certain combined stores and direct-to-customers sales metrics, excluding the
sales from WSS and atmos.
Thirteen weeks Twenty-six weeks
Constant Comparable Constant Comparable
Currencies Sales Currencies Sales
North America (21.5) % (16.1) % (19.2) % (13.9) %
EMEA 6.7 % 4.5 % 26.7 % 23.6 %
Asia Pacific 21.5 % 17.7 % 18.1 % 14.0 %
(14.1) % (10.3) % (10.1) % (6.2) %
Second Quarter 2022 Form 10-Q Page 23
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Despite the decline in sales as compared with our record levels in 2021, sales
exceeded the results of 2019. Excluding the effect of foreign exchange rate
fluctuations and our acquisitions, sales increased by 7.4% and by 1.1% for the
quarter and year-to-date periods, respectively, as compared with the
corresponding periods of 2019.
Comparable sales for both our stores and direct-to-customer channels decreased
for the quarter. Our direct-to-customer channel saw significant decreases as
shoppers navigated back to physical locations. For the year-to-date period,
comparable sales were slightly up for our stores, while direct-to-customer
decreased when compared with the prior year.
Our North American operating segment's sales, excluding WSS, and
comparable-store sales for the current year were negatively affected by the
significant fiscal stimulus, which contributed to last year's growth, as well as
the effects of inflation on customer demand. Additionally, the wind down of the
Footaction business negatively affected sales, last year we operated 211 stores
as compared with 14 this quarter. Within EMEA, sales from the Foot Locker and
Sidestep banners increased as tourism returned to more historical levels coupled
with an increase in operating days resulting from COVID-19 related store
closures in the prior year. Asia Pacific , excluding atmos, generated increases
from both strong performance in Australia and New Zealand , coupled with growth
in Asia , based on expansion in that region. Asia Pacific's increases were also
affected by the increase in operating days, the current year was essentially
open for all days as compared with approximately 80% last year.
From a product perspective for the combined channels, sales declined for both
the quarter and year-to-date periods and was related to decreased sales of
footwear and apparel, partially offset by increased sales of accessories. The
decline in footwear for the second quarter was primarily due to men's and kids'
basketball footwear, and the decline in sales of apparel represented a decline
in sales of men's and performance apparel, however sales of women's apparel
generated an increase. For the year-to-date period, all wearer segments within
the footwear category experienced declines, with the largest decreases coming
from men's and children's basketball footwear styles. Apparel sales decreased in
the men's and children's categories, while women's increased.
Gross Margin
Thirteen weeks ended Twenty-six weeks ended
July 30, July 31, July 30, July 31,
2022 2021 2022 2021
Gross margin rate 31.7 % 35.1 % 32.9 % 34.9 %
Basis point decrease in the
gross margin rate (340) (200)
Components of the change:Merchandise margin rate decline (260) (160) Occupancy and buyers' compensation expense rate (80) (40) Gross margin is calculated as sales minus cost of sales. Cost of sales includes: the cost of merchandise, freight, distribution costs including related depreciation expense, shipping and handling, occupancy and buyers' compensation. Occupancy costs include rent (including fixed common area maintenance charges and other fixed non-lease components), real estate taxes, general maintenance, and utilities. The gross margin rate decreased to 31.7% for the thirteen weeks endedJuly 30, 2022 , as compared with the corresponding prior-year period, reflecting a 260-basis point decrease in the merchandise margin rate, and an 80-basis point deleverage in the occupancy and buyers' compensation rate. For the twenty-six weeks endedJuly 30, 2022 , the gross margin rate declined by 200 basis points, reflecting a 160-basis point decrease in the merchandise margin rate and a 40-basis point deleverage in the occupancy and buyers' compensation rate. Second Quarter 2022 Form 10-Q Page 24 Table of Contents The declines in merchandise margin rate reflected higher markdowns versus historically-low levels last year and higher supply chain costs. Additionally, merchandise margin is negatively affected by the recent acquisitions that generate a lower rate, which is offset by lower occupancy costs and therefore not significantly affecting the overall gross margin rate. The occupancy rate deleverage also reflected the effect of prior year rent abatements related to COVID-19 that represented$6 million and$11 million for the thirteen and twenty-six weeks of last year, respectively, as compared with insignificant amounts this year.
Selling, General and Administrative Expenses (SG&A)
Thirteen weeks ended Twenty-six weeks ended
July 30, July 31, July 30, July 31,
($ in millions) 2022 2021 2022 2021
SG&A $ 452 $ 450 $ 915 $ 868
$ Change $ 2 $ 47
% Change 0.4 % 5.4 %
SG&A as a percentage of sales 21.9 % 19.8 % 21.6 % 19.6 %
SG&A increased by $2 million , or $22 million excluding the effect of foreign
currency fluctuations, for the thirteen weeks ended July 30, 2022 , as compared
with the corresponding prior-year period. For the year-to-date period SG&A
increased by $47 million , or $77 million excluding the effect of foreign
currency fluctuations. Our newly acquired businesses contributed $38 million and
$72 million for the quarter and year-to-date periods, respectively, to the
overall increase. As a percentage of sales, SG&A increased by 210 basis points
and 200 basis points for the thirteen and twenty-six weeks ended July 30, 2022 ,
respectively, driven by higher labor costs, information technology and support
expenses, as well as the effect of COVID-19 related matters in the prior year.
SG&A for the thirteen and twenty-six weeks ended
Depreciation and Amortization
Thirteen weeks ended Twenty-six weeks ended
July 30, July 31, July 30, July 31,
($ in millions) 2022 2021 2022 2021
Depreciation and amortization $ 51 $ 48 $
105 $ 93
$ Change $ 3 $ 12
% Change 6.3 % 12.9 %
Depreciation and amortization expense increased by $3 million and $12 million
for the thirteen weeks and twenty-six weeks ended July 30, 2022 , respectively,
as compared with the corresponding prior-year periods. Excluding the effect of
foreign currency fluctuations, depreciation and amortization increased by $5
million and $15 million for the thirteen weeks and twenty-six weeks ended July
30, 2022 , respectively, as compared with the corresponding prior-year periods.
The increase was primarily related to the acquisitions of WSS and atmos.
Impairment and Other Charges
Transformation consulting charges were$9 million and$10 million for the thirteen and twenty-six weeks endedJuly 30, 2022 , respectively. Impairment of long-lived assets and right-of-use assets was$2 million and$5 million for the thirteen and twenty-six weeks endedJuly 30, 2022 , respectively, and$39 million for both the thirteen and twenty-six weeks endedJuly 31, 2021 . Acquisition and integration costs related to WSS and atmos were$1 million and$3 million for the thirteen and twenty-six weeks endedJuly 30, 2022 , respectively. Second Quarter 2022 Form 10-Q Page 25 Table of Contents For the thirteen and twenty-six weeks endedJuly 31, 2021 , we recorded charges of$4 million in lease-related termination costs, offset by$7 million of insurance recovery income related to 2020 social unrest losses. For the twenty-six weeks endedJuly 31, 2021 , we recorded an impairment charge of$2 million related to the underperformance of one of our minority investments, and a severance charge of$2 million in connection with the reorganization of certain support functions. Corporate Expense Thirteen weeks ended Twenty-six weeks ended July 30, July 31, July 30, July 31, ($ in millions) 2022 2021 2022 2021 Corporate expense$ 33 $ 32 $ 70 $ 61 $ Change$ 1 $ 9 Corporate expense consists of unallocated general and administrative expenses as well as depreciation and amortization related to our corporate headquarters, centrally managed departments, unallocated insurance and benefit programs, certain foreign exchange transaction gains and losses, and other items. Corporate expense increased by$1 million and$9 million for the thirteen and twenty-six weeks endedJuly 30, 2022 , respectively, as compared with the corresponding prior-year periods. Depreciation and amortization included in corporate expense was$10 million and$9 million for the thirteen weeks endedJuly 30, 2022 andJuly 31, 2021 , respectively, and$19 million and$16 million for the twenty-six weeks endedJuly 30, 2022 andJuly 31, 2021 , respectively. These increases were primarily due to higher information technology and support expenses. Operating Results Thirteen weeks ended Twenty-six weeks ended July 30, July 31, July 30, July 31, ($ in millions) 2022 2021 2022 2021 Division profit$ 184 $ 332 $ 444 $ 647 Division profit margin 8.9 % 14.6 % 10.5 % 14.6 %
Division profit margin as a percentage of sales decreased to 8.9% and 10.5% of sales for the thirteen weeks and twenty-six weeks endedJuly 30, 2022 , respectively, with both sales channels experiencing declines in gross margin and deleveraging expenses. WSS and atmos generated division profit of$6 million and$8 million , respectively for the second quarter, and$19 million and$16 million for the year-to-date period. Interest Expense, Net Thirteen weeks ended Twenty-six weeks ended July 30, July 31, July 30, July 31, ($ in millions) 2022 2021 2022 2021 Interest expense$ (6) $ (3) $ (12) $ (6) Interest income 1 1 2 2
Interest (expense) income, net
We recorded$5 million and$10 million of net interest expense for the thirteen and twenty-six weeks endedJuly 30, 2022 , respectively as compared with net interest expense of$2 million and$4 million for the corresponding prior-year periods. Interest expense increased primarily due to the issuance of the 4%
Notes.
Second Quarter 2022 Form 10-Q Page 26
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Other Income / (Expense), Net
Thirteen weeks ended Twenty-six weeks ended
July 30, July 31, July 30, July 31,
($ in millions) 2022 2021 2022 2021
Other income / (expense), net $ 9 $ 325 $ (13) $ 329
This caption includes non-operating items, including franchise royalty income,
changes in fair value of minority investments measured at fair value or using
the fair value measurement alternative, changes in the market value of our
available-for-sale security, our share of earnings or losses related to our
equity method investments, and net benefit (expense) related to our pension and
postretirement programs excluding the service cost component.
The thirteen weeks ended July 30, 2022 reflected a gain of $18 million from the
divestiture of Eastbay Team Sales, $13 million loss related to a decline in the
fair value of our Retailors, Ltd. investment, partially offset by $1 million of
income associated with our other minority investments. The twenty-six weeks
ended July 30, 2022 reflected the gain from the divestiture of $18 million , a
decline in our Retailors, Ltd. investment of $38 million , offset by $1 million
of dividend income, and $1 million of income from our other minority
investments. The prior year amounts included a gain of $290 million representing
the fair value adjustment of our minority investment in GOAT, a gain of $24
million related to our Retailors, Ltd. investment, $4 million insurance recovery
related to the 2020 social unrest, and $2 million of income associated with our
other minority investments. These were all considered our non-GAAP adjustments
in all of the periods presented.
Other income / (expense), net also includes
Income Taxes
Thirteen weeks ended Twenty-six weeks ended
July 30, July 31, July 30, July 31,
($ in millions) 2022 2021 2022 2021
Provision for income taxes $ 49 $ 157 $ 107 $ 239
Effective tax rate 34.5 % 26.8 % 32.1 % 27.4 %
Our current year interim provision for income taxes was measured using an estimated annual effective tax rate, which represented a blend of federal, state, and foreign taxes and included the effect of certain nondeductible items as well as changes in our mix of domestic and foreign earnings or losses, adjusted for discrete items that occurred within the periods presented.
We regularly assess the adequacy of our provisions for income tax contingencies in accordance with applicable authoritative guidance on accounting for income taxes. As a result, we may adjust the reserves for unrecognized tax benefits considering new facts and developments, such as changes to interpretations of relevant tax law, assessments from taxing authorities, settlements with taxing authorities, and lapses of statutes of limitation. The changes in tax reserves were not significant for any of the periods presented.
In the second quarter of 2022, we recorded a
Partially offsetting this charge were tax benefits totaling$2 million from reserves releases due to various statute of limitation lapses. The changes in tax reserves were not significant for any of the prior-year periods. During the quarter endedJuly 30, 2022 , we also recorded a tax expense of$6 million in connection with Eastbay Team Sales divestiture, including the effect of a non-deductible goodwill write-off. Second Quarter 2022 Form 10-Q Page 27 Table of Contents
During the twenty-six weeks endedJuly 30, 2022 , we recorded$1 million of expense related to tax deficiencies from share-based compensation, as compared with excess tax benefits of$1 million and$2 million in the first and second quarters of the corresponding prior-year periods, respectively. Excluding the above-mentioned discrete items, the effective tax rates for the current year periods increased, as compared with the corresponding prior-year periods, primarily due to the change in the mix of domestic and foreign earnings. Our effective tax rate will vary due to numerous factors, such as level and geographic mix of income and losses, acquisitions, investments, intercompany transactions, foreign currency exchange rates, our stock price, changes in our deferred tax assets and liabilities and their valuation, changes in the laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework and other laws and accounting rules in various jurisdictions. OnAugust 16, 2022 ,President Biden signed the Inflation Reduction Act ("IRA") of 2022 into law. The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum tax and a 1% excise tax on corporate stock repurchases in tax years beginning afterDecember 31, 2022 . We do not currently expect the IRA tax provisions will have a significant effect on our overall effective tax rate.
Liquidity and Capital Resources
Liquidity
Our primary source of liquidity has been cash flow from operations, while the principal uses of cash have been to fund inventory and other working capital requirements; finance capital expenditures related to store openings, store remodelings, internet and mobile sites, information systems, and other support facilities; make retirement plan contributions, quarterly dividend payments, and interest payments; and fund other cash requirements to support the development of our short-term and long-term operating strategies, including strategic investments. We generally finance real estate with operating leases. We believe our cash, cash equivalents, future cash flow from operations, and amounts available under our credit agreement will be adequate to fund these requirements. The Company may also repurchase its common stock or seek to retire or purchase outstanding debt through open market purchases, privately negotiated transactions, or otherwise. Share repurchases and retirement of debt, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions, strategic considerations, and other factors. The amounts involved may be material. As ofJuly 30, 2022 , approximately$1,103 million remained available under our current$1.2 billion share repurchase program, which was approved inFebruary 2022 . The new program does not have an expiration date. Any material adverse change in customer demand, fashion trends, competitive market forces, or customer acceptance of our merchandise mix, retail locations and websites, uncertainties related to the effect of competitive products and pricing, our reliance on a few key suppliers for a significant portion of our merchandise purchases and risks associated with global product sourcing, economic conditions worldwide, the effects of currency fluctuations, continued uncertainties caused by the COVID-19 pandemic, as well as other factors listed under the headings "Disclosure Regarding Forward-Looking Statements," and "Risk Factors" could affect our ability to continue to fund our needs from business operations. Second Quarter 2022 Form 10-Q Page 28 Table of Contents Operating Activities Twenty-six weeks ended July 30, July 31, ($ in millions) 2022 2021
Net cash (used in) provided by operating activities
402
$ Change$ (504) Operating activities reflects net income adjusted for non-cash items and working capital changes. Adjustments to net income for non-cash items include gains, losses, impairment charges, other charges, depreciation and amortization, deferred income taxes, and share-based compensation expense. The decrease in cash from operating activities reflected higher merchandise purchases and payments of accounts payable and accrued and other liabilities, as well as lower net income, as compared with the same period last year. Higher merchandise purchases were necessary as our year-end inventory levels were affected by the COVID-19 pandemic and the associated supply chain challenges.
As of
Investing Activities
Twenty-six weeks ended
July 30, July 31,
($ in millions) 2022 2021
Net cash used in investing activities
$ 46
The change in investing activities primarily reflected higher capital expenditures, partially offset by divestiture of certain assets.
For the twenty-six weeks ended
During the twenty-six weeks ended
We have invested$4 million in minority investments during the current year, including various limited partner venture capital funds managed by Black fund managers, who are committed to advancing diverse-led businesses as part of our Leading in Education and Economic Development (LEED) initiative. During the second quarter of 2022, we sold our position in one of our minority investments receiving proceeds of$12 million . In the prior-year period, we invested$68 million in a public entity, Retailors Ltd., and$10 million in minority investments primarily related to LEED.
Also during the second quarter of 2022, we sold our Eastbay Team Sales business
receiving proceeds of
We sold the formerRunners Point headquarters in the first quarter of 2021, generating proceeds of$3 million . Also last year, we received insurance proceeds of$3 million related to property and equipment claims from the social unrest losses in 2020. Second Quarter 2022 Form 10-Q Page 29 Table of Contents Financing Activities Twenty-six weeks ended July 30, July 31, ($ in millions) 2022 2021
Net cash used in financing activities
$ (120) Cash used in financing activities was driven by our return to shareholders initiatives, including our share repurchase program and cash dividends, as follows: Twenty-six weeks ended July 30, July 31, ($ in millions) 2022 2021 Share repurchases$ 129 $ 41 Dividends paid on common stock 76 42
Total returned to shareholders
During the twenty-six weeks endedJuly 30, 2022 , we repurchased 4,050,000 shares of common stock for$129 million under our share repurchase programs, whereas in the prior year we spent$41 million to repurchase shares. We also declared and paid$76 million in dividends representing a quarterly rate of$0.40 per share in 2022, as compared with a quarterly rate of$0.20 per share in the prior-year period. We paid$1 million to satisfy tax withholding obligations relating to the vesting of share-based equity awards during the twenty-six weeks endedJuly 30, 2022 , as compared with$11 million in 2021. Offsetting this amount were proceeds received in connection with employee stock programs of$6 million in the current year, as compared with$17 million in the prior-year period.
Additionally, we paid
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the 2021 Form 10-K.
Recent Accounting Pronouncements
Descriptions of the recently issued and adopted accounting principles are included in Item 1. "Financial Statements" in Note 1, Summary of Significant Accounting Policies, to the Condensed Consolidated Financial Statements.
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