Note 22 - Share-based Compensation

12 Months Ended

Feb. 01, 2025

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

22. Share-Based Compensation

Stock Awards

Under our amended and restated 2007 Stock Incentive Plan (the "2007 Stock Plan"), stock options, restricted stock, restricted stock units, stock appreciation rights, or other share-based awards may be granted to nonemployee directors, officers, and other employees, including our subsidiaries and operating divisions worldwide. Options for employees become exercisable in substantially equal annual installments over a three-year period, beginning with the first anniversary of the date of grant of the option, unless a shorter or longer duration is established at the time of the option grant. The options terminate ten years from the date of grant. In 2023, the 2007 Stock Plan was amended and restated to increase the number of shares of common stock reserved for all awards to 14 million shares. As of February 1, 2025, there were 10,347,840 shares available for issuance under this plan.

During 2022, the Company granted options and other awards to its President and Chief Executive Officer, Mary N. Dillon. These awards were granted outside of the 2007 Stock Incentive Plan as employment inducement awards and did not require shareholder approval under the rules of the New York Stock Exchange or otherwise. Shares available for future grant under this plan of 584,127 are reserved for the sole purpose to issue shares pursuant to her employment inducement awards.

Employees Stock Purchase Plan

Under the 2023 Foot Locker Employee Stock Purchase Plan ("2023 ESPP"), participating employees are able to contribute up to 10% of their annual compensation, not to exceed $25,000 in any plan year, through payroll deductions to acquire shares of our common stock at 85% of the lower market price on specified dates in each plan year. Participating employees are permitted to purchase shares in June and December of each year. Of the 3,000,000 shares of common stock authorized under the 2023 ESPP, there were 2,668,478 shares available for purchase as of February 1, 2025.

Share-Based Compensation Expense

($ in millions)	2024		2023		2022
Restricted stock units and performance stock units	$	19	$	9	$	26
Options and employee stock purchase plan		2		4		5
Total share-based compensation expense	$	21	$	13	$	31
Tax benefit recognized	$	3	$	2	$	3

Restricted Stock Units and Performance Stock Units

Restricted stock units ("RSU") are awarded to certain officers, key employees of the Company, and nonemployee directors. Additionally, performance stock units ("PSU") are awarded to officers and certain key employees in connection with our long-term incentive program. Each RSU and PSU represents the right to receive one share of our common stock provided that the applicable performance and vesting conditions are satisfied. PSU awards granted in 2024 and 2023 also include a performance objective based on our relative total shareholder return over the performance period to a pre-determined peer group, assuming the reinvestment of dividends. The fair value of these awards is determined using a Monte Carlo simulation as of the date of the grant.

Generally, RSU awards fully vest after the passage of time, typically three years for employees and one year for nonemployee directors, provided there is continued service with the Company until the vesting date, subject to the terms of the award. PSUs granted in 2024 vest after the attainment of the performance period, which is three years. Prior PSU grants vested after the attainment of the performance period of two years and an additional one-year period. No dividends are paid or accumulated on any RSU or PSU awards. Compensation expense is recognized over the vesting period on a straight-line basis.

RSU and PSU activity is summarized as follows:

	Number of Shares			Weighted-Average Remaining Contractual Life		Weighted-Average Grant Date Fair Value
	(in thousands)			(in years)		(per share)
Nonvested at beginning of year		1,378				$	38.81
Granted		1,383					29.00
Vested		(535	)				47.29
Performance adjustment (1)		(495	)
Forfeited		(128	)				32.25
Nonvested at February 1, 2025		1,603			0.9	$	30.65
Aggregate value ($ in millions)	$	49

⁽¹⁾ This represents adjustments made to PSU awards reflecting changes in estimates based upon our current performance against predefined financial and market targets.

The total fair value of awards vested was $25 million, $23 million, and $6 million, for 2024, 2023, and 2022, respectively. Unrecognized compensation cost at  February 1, 2025 was $26 million.  

Stock Options

Effective in 2024, we no longer issue stock option grants. The table below provides activity for existing stock option awards for 2024:

	Number of Shares			Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price
	(in thousands)			(in years)		(per share)
Options outstanding at the beginning of the year		2,738				$	48.23
Exercised		(257	)				21.63
Expired or cancelled		(392	)				53.54
Options outstanding at February 1, 2025		2,089			2.9	$	50.50
Options exercisable at February 1, 2025		1,844			2.2	$	52.32

The total fair value of options vested was $2 million, $5 million, and $4 million, during 2024, 2023, and 2022, respectively.

During the years ended February 1, 2025,  February 3, 2024, and  January 28, 2023, we received $5 million, $5 million, and $6 million, respectively, in cash from option exercises and the related tax benefit recognized were not significant. The total intrinsic value of options exercised, outstanding, and exercisable was not significant for any of the periods presented. 

As of February 1, 2025, there was $1 million of total unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a remaining weighted-average period of 1.0 year.

The following table summarizes information about stock options outstanding and exercisable at February 1, 2025:

	Options Outstanding						Options Exercisable
			Weighted-
			Average		Weighted-				Weighted-
			Remaining		Average				Average
Range of Exercise	Number		Contractual		Exercise		Number		Exercise
Prices	Outstanding		Life		Price		Exercisable		Price
	(in thousands, except prices per share and contractual life)
$21.60 - $30.98		422		4.1	$	26.67		372	$	26.37
$36.49 - $46.64		506		5.8		40.68		311		41.82
$53.61 - $58.94		309		2.1		56.46		309		56.46
$62.02 - $72.83		852		0.8		65.97		852		65.97
		2,089		2.9	$	50.50		1,844	$	52.32