Foot Locker vs. Finish Line: Could The Tides Be Turning In Favor Of The Underdog?

Finish Line
A Finish Line store at the Mall of Millenia in Orlando.
Courtesy of retailer.

When it comes to conversations about top athletic footwear retailers, two names are sure to be mentioned: Foot Locker Inc. and Finish Line Inc.

Foot Locker is a larger company with an international presence, but stateside, the two firms tend to go head to head year-round. A review of the numbers alone shows New York-based Foot Locker significantly outpaces Indianapolis-based Finish Line in both profits and revenues — an expected situation based on the size of the firms. But for much of past several quarters, Foot Locker has also racked up multiple earnings wins while a supply-chain glitch and product issues hurt Finish Line’s performance.

More recently, however, the tides appear to have shifted — albeit slightly — in favor of once-challenged Finish Line.

When Finish Line reported Q1 in late June, the company topped market watchers’ forecasts for both revenues and profits, leading its stock to surge more than 20 percent. The stock has continued to ride high since. Meanwhile, Foot Locker posted a roughly in-line Q1 in May that left eager investors relatively unimpressed — temporarily driving the firm’s stock down.

Now, Cowen and Co. analyst John Kernan is adding more fuel to the fire in his latest report, which suggests that Foot Locker has become more promotional compared with Finish Line in recent months.

Our proprietary daily footwear inventory tracker suggests promotions at Foot Locker have remained elevated since early May across men’s, women’s and kids, while Finish Line has trended better,” Kernan wrote Wednesday. “We remain cautious on Foot Locker in particular, and note that Finish Line shares are up 28 percent in the last month following Q1 results.”

A Foot Locker store. A Foot Locker store. FN Archives.

According to the report, Cowen and Co.’s proprietary footwear tracker indicated a decline in the percentage of shoes on sale at Finishline.com out of the total number of shoes available. Meanwhile, Kernan said the tracker found that Foot Locker has seen a significant increase in its men’s, women’s and kids shoes on sale in the running, basketball, training (women’s only) and casual categories.

Since early May, we have seen a meaningful increase in the percentage of SKUs on sale in men’s running, basketball and casual categories, and women’s running, training and casual categories,” Kernan added. “This could indicate difficulties in full-price selling for these categories.”

Inquiring minds will have an opportunity to see how all of the conjecture actually shakes out when both firms report Q2 earnings in the coming month. Foot Locker is expected to report in mid-to-late August, and Finish Line’s numbers are due in late September.