Shares of Foot Locker (FL 4.50, -3.13) have lost 41% of their value this session after the retailer posted worse-than-expected third quarter earnings and slashed its fiscal year guidance.

Earnings came in at $0.18 per share, or $27 million, excluding nonrecurring items.  The results fell short of the $0.25 consensus estimate and year-ago earnings of $0.21 per share, or $33 million.

Third quarter sales fell 3.5% to $1.31 billion, with same-store sales falling 1.7%.  Slightly higher revenue of $1.35 billion was expected.

Given the tough retail environment, Foot Locker cut its fiscal year 2009 earnings per share forecast to between $0.50 and $0.63, excluding impairment charges, from its August guidance of between $0.70 and $0.85. The outlook falls well short of the $0.82 consensus estimate.

Although Foot Locker sports a relatively healthy balance sheet, the sustainability of its $0.60 annual dividend will be questioned given the depressed earnings outlook.  At current prices, FL is yielding 13.3%.

HJ Heinz (HNZ 38.02) easily topped second quarter earnings estimates, benefiting from the company's decision to hedge currency translations for the quarter and through the remainder of the fiscal year.

The food company's revenue rose 3.5% year-over-year to $2.6 billion, which was short of the $2.7 billion consensus estimate.  All segments generated year-over-year organic sales growth, with the exception of U.S. foodservices.  Volume declined by 1.3%.

The company, which gets 55% of revenue overseas, received a $92 million pretax currency benefit on its decision to hedge against foreign currency gains.

Second quarter earnings came in at $0.87 per share, or $277 million, which was $0.11 better than the consensus estimate of $0.76.

The company reaffirmed its fiscal year 2009 earnings guidance of between $2.87 and $2.91 per share, versus the $2.90 consensus.

Gap (GPS 9.51) effectively managed inventory and costs in the third quarter, resulting in the retailer increasing earnings per share despite a decline in revenue.

Revenue fell 7.6% year-over-year to $3.56 billion, which matched expectations. Same-store sales fell across all brands -- Gap North America (-7%), Banana Republic North America (-11%), Old Navy North America (-18%) and International (-1%)

Earnings, however, rose 16.7% year-over-year to $0.35 per share, or $246 million.  The company benefited from share repurchases that added $0.04 per share, a 120 basis point increase in gross margins to 38.7%, and a 36 basis point decrease in selling, general and administrative expenses to 27.6%.  In addition, interest expenses declined by $23 million.

A total of 5.7 million shares were repurchased for $100 million in the third quarter, with year-to-date repurchases at 33.4 million shares for $600 million.  This leaves the number of diluted shares at 712 million, down from 791 million in the year-ago quarter.

Gap expects the economic environment to remain challenging.  However, its 13% decrease in inventory per square foot in the third quarter should help limit pressure on margins in the fourth quarter.

The company reaffirmed its fiscal year 2009 earnings expectations of between $1.30 and $1.35, marking a year-over-year increase of at least 23.8%.  Wall Street expects earnings of $1.33 per share.

Gap (GPS 9.51) effectively managed inventory and costs in the third quarter, resulting in the retailer increasing earnings per share despite a decline in revenue.

Revenue fell 7.6% year-over-year to $3.56 billion, which matched expectations. Same-store sales fell across all brands -- Gap North America (-7%), Banana Republic North America (-11%), Old Navy North America (-18%) and International (-1%)

Earnings, however, rose 16.7% year-over-year to $0.35 per share, or $246 million.  The company benefited from share repurchases that added $0.04 per share, a 120 basis point increase in gross margins to 38.7%, and a 36 basis point decrease in selling, general and administrative expenses to 27.6%.  In addition, interest expenses declined by $23 million.

A total of 5.7 million shares were repurchased for $100 million in the third quarter, with year-to-date repurchases at 33.4 million shares for $600 million.  This leaves the number of diluted shares at 712 million, down from 791 million in the year-ago quarter.

Gap expects the economic environment to remain challenging.  However, its 13% decrease in inventory per square foot in the third quarter should help limit pressure on margins in the fourth quarter.

The company reaffirmed its fiscal year 2009 earnings expectations of between $1.30 and $1.35, marking a year-over-year increase of at least 23.8%.  Wall Street expects earnings of $1.33 per share.

Wal-Mart (WMT 50.66) CEO Lee Scott is stepping down and will be replaced by Mike Duke, effective February 1, 2009.

Duke previously led Wal-Mart's Logistics Division, U.S. operations and International operations.  He was elected to the company's board of directors, effective immediately.

Scott's retirement comes after nearly 30 years with Wal-Mart, with the last nine as president and CEO. 

Although there were some disgruntled shareholders during Scott's tenure, Wal-Mart's stock has outperformed the market since his appointment in January 2000 -- slipping 15.8% compared to the S&P 500's decline of 29.5%, both including dividends, as of November 14.

WMT is up 1.7% in pre-market trading.

Dell (DELL 9.81) reported better-than-expected third quarter earnings, but only because of intense cost cutting measures as revenue fell more than $1 billion short of estimates.

Third quarter revenue dropped 3.1% year-over-year to $15.16 billion, which missed the $16.22 billion consensus estimate.

Unit shipment growth of 3% was offset by lower selling prices. Desktop PC net revenue (-14%) continues to drop as consumer preferences shift toward mobile products and businesses pare spending.  The decline in Desktop PC sales was partially offset by a 3% increase in mobile net revenue and a 2% increase in software and peripherals net revenue.

Despite the revenue drop, earnings per share increased 11% year-over-year to $0.37, beating the expected earnings of $0.31.  How does Dell increase earnings per share when revenue unexpectedly declined?  Cost cutting and share repurchases.

The company's total headcount stands at 80,800, as Dell slashed 2,200 jobs in  the second quarter, bring its total cuts to 8,300 from the prior year.  This helped selling, general and administrative expenses fall $169 million, or to 6.7% of revenue from 11.2% of revenue in the year-ago quarter.

Product mix was also better, with more sales of higher margin software, peripherals and services helping to increase gross margin to 18.8% from 18.5%.

Dell spent $400 million to repurchase 21 million shares in the third quarter, with the number of diluted outstanding shares falling 2% from the second quarter and 14% from the prior year.  This gave EPS a boost of  about $0.04 compared to the year-ago quarter.  Net income, which is not impacted by share buybacks, fell 5% to $727 million compared to the previous year.

The company's cash conversion cycle, which is negative unlike most companies' because Dell sells products quicker than it pays suppliers, rose to -25 days from -35 days, resulting in a decrease of $86 million in operating cash flow.  Dell said the negative operating cash flow was due to slowing global industry demand in October.  Dell continue to have a strong liquidity position with $8.9 billion in cash and investments.

Dell did not give guidance, but did note that it expects global IT end-user demand will continue to be challenging.  In turn, Dell will continue to cut costs and has implemented a hiring freeze across the company.

Executives at Citigroup (C 4.71) have considered selling some or all of the company due to the sharp drop in Citi's stock price, according to the Wall Street Journal's sources.

Shares of Citigroup plunged 26% yesterday to their lowest level in more than 15 years.  As a result, Citi has looked at selling Smith Barney, its global credit-card division and its transaction-services unit, according to the Journal's sources.

The Journal reports that internal discussions at Citi are preliminary, and are not an indication that Cit's management and board are backing down form their view that the firm has ample capital.

With $2 trillion in assets on its balance sheet, a Citi buyout would dwarf other recent takeovers.  It also limits the number of firms that would be capable of buying the banking giant.

Citi is up 10.4% in pre-market trading.

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