The specialty athletic retailer has recently struggled — due to both industrywide and company-specific challenges — to meet its financial targets. Ahead of Friday’s first-quarter earnings release, investors and market watchers have a lot to mull over, not the least of which is Wednesday’s murmurings of a Nike-Amazon partnership, which sent Finish Line’s shares tumbling.
Here, three things to look for in Finish Line’s Q1 announcement on June 23.
The Big Numbers
On average, analysts predict that the Indianapolis-based retailer will post flat year-over-year earnings per share of 23 cents and revenues of $434.2 million, representing a decline of 4.3 percent over the comparable period.
“We believe the continued weakness in soft goods — both apparel and accessories — coupled with the soft March rebound from the delayed tax refunds in February and the drag of Nike’s overwhelming deceleration were too much [for Finish Line] to overcome,” Canaccord Genuity Inc. analyst Camilo Lyon wrote on June 21, explaining his decision to lower his EPS estimates for the company, from 24 cents to 23 cents per share.
Finish Line’s stock has seen significant volatility in recent months — hitting a six-year low of $12.83 in March following a fourth-quarter earnings miss.
On Wednesday, the firm’s shares dipped into the red — in tandem with athletic retail stocks Foot Locker Inc., Hibbett Sports and Dick’s Sporting Goods — as investors became spooked over a potential Nike-Amazon partnership, suggested in a Goldman Sachs client note. (Investors were likely concerned that a Nike-Amazon partnership would mean that Nike would taper down its brick-and-mortar partnerships and/or distribute less premium product through retail stores.)
Finish Line ended the trading day Wednesday with a share price of $12.50. The brand’s stock is likely to show movement in response to Friday’s earnings release.
Market watchers have yet to determine the significance — or lack thereof — of U.K. sports retailer Sports Direct International’s recent investments in Finish Line.
Sports Direct has continued to build up its investments in Finish Line over the last few months and now holds a 20 percent economic interest in the company via a derivative known as contracts for difference.
Susquehanna Financial Group LLLP analyst Sam Poser said in April that he believed the investments portended a full-on Finish Line takeover by Sports Direct.
Now, in a June 16 note, Poser said he was “unsure of the ultimate endgame” for Sports Direct as it relates to its plans for Finish Line.
“If Sports Direct does intend to buy Finish Line, we believe that [the company] could be planning to shift Finish Line to a more value-focused athletic footwear concept — in other words, a DSW-like mall athletic retailer,” Poser writes.
Undoubtedly, shareholders are waiting with bated breath for clarity from Finish Line on whether a buyout is looming.