Foot Locker is undergoing a major reorganization that may help the group to fetch a higher valuation. It has retained Lehman Brothers as a financial advisor to evaluate strategic alternatives for the company, and to deal with in inquiries from potential investors. Some private equity firms have reportedly made approaches recently, after the athletic retailing giant failed in its big to take over Genesco, which finally ended up being bought by its rival The Finish Line.

While warning investors that it will likely incur a loss of $23.3-31.1 million for the 2nd quarter, instead of a previously projected profit of $150,000-200,000, the company said it will shut down up to 250 underperforming stores in the USA, rather than only 125. It will also resume its expansion in Europe, with up to 30 new units budgeted for an opening in 2008. Reports indicate that Foot Locker may even stop its experiment in casual footwear through its new family store chain, Footquarters.

On the management front, Foot Locker Europe’s current president and chief executive, Keith Daly, has moved back to the USA to replace the already departed Nick Grayston as president and CEO of Foot Locker U.S., effective Aug. 6. Dick Johnson, president and CEO of since 2003, is going to take over Daly’s position in the European head office at Vianen, in the Netherlands. Pending the nomination of a successor, Dowe Tillema, chief financial officer of the dotcom unit, is promoted as its executive vice president.

The profit warning comes as the management expects to report a 7-8 percent drop in comparable store sales for the 2nd quarter, combined with an aggressive liquidation of slow-moving products that involved markdowns of $55 million at cost.