Finish Line Stock Soars On Q1 Earnings, Sales Beat

Finish Line
Finish Line
Courtesy photo

Things continue to look up for Finish Line Inc. Despite all-around turbulence in the markets Friday stemming from a stunning Brexit vote, the specialty athletic retailer saw its stock gain more than 21 percent in early morning trading on the heels of a better-than-expected Q1 earnings report.

The Indianapolis-based company said its Q1 net income decreased 30 percent, to $9.6 million, or 23 cents per diluted share, from $13.8 million, or 30 cents per diluted share, in the comparable period. The decline was still a beat on market watchers’ estimates for Q1 diluted earnings per share of 22 cents.

Revenues gained 2.3 percent year over year, to $453.5 million, from $443.4 million in the comparable period. Revenues also topped forecasts, which predicted that the firm’s sales would land at $449.6 million. Meanwhile, overall comps at the company advanced 1.5 percent.

The first quarter played out much like we expected despite the difficult retail environment,” Finish Line director and CEO Sam Sato said in a release. “Finish Line and JackRabbit comparable sales were up low single digits. Our Macy’s business increased in the low 20 percent range and EPS was 23 cents. Importantly, we made further progress addressing the temporary challenges that have impacted our recent performance and started working on fortifying the foundational strength of the company to drive improved results near-term and position Finish Line to compete and succeed long term.”

Sato was likely referencing the retailer’s supply chain hiccup, which cost the firm about 42 cents in earnings per share in Q3.

[Regarding supply chain], we further improved our performance in the fiscal quarter and are now above or close to historic levels on all key metrics,” Sato said. “Direct-to-consumer fulfillment rates in the first 24 hours hit 90 percent, up from 80 percent in Q4 as inventory accuracy and out-of-stock rates have continued to improve. Meanwhile, fulfillment in the first 48 hours, cancellation rates and click-to-door delivery times are now surpassing previous high watermarks as we’ve started to realize the benefits of our new warehouse and order management system.”

By category, Sato said Finish Line improved its overall positioning by upping its assortment in running and basketball with “the best retro running and basketball shoes, along with the latest casual running styles from several brand partners.”

Running and basketball comps increased low-single digits in Q1, he said. Meanwhile, sales in men’s, which posted a low-single digit comp increase, were led by Nike running.

Adidas styles also saw “explosive growth,” the CEO noted.

“This is true across casual and performance led by Superstar, Stan Smith, NMD and Ultra Boost,” Sato said.

Men’s basketball was highlighted by sales of Curry 2 from Under Armour, he added.

The women’s business also saw comps increase high-single digits, driven by Nike, Converse and Adidas styles.

“We are also seeing great excitement in our Puma business fueled by classics along with hot new style Fierce and Fenty by Rihanna,” said Sato.

Looking ahead, the CEO — who replaced former CEO Glenn Lyon in February — said he expects a lot of Q1’s style trends to spill into the second quarter.

As we approach the Summer Olympics in August, new innovations in running such as Nike’s Zoom and Lunar platforms will fuel consumer excitement, which we expect will translate into accelerated sell-throughs for the category as the year progresses,” Sato said. “Based on the work we are doing with our vendor partners to elevate our product offering, we believe we’ll be well-positioned to capitalize on the renewed excitement in running and the strong trends in casual and retro footwear during the key back-to-school and holiday selling seasons.”