Finish Line’s Stock Rallies Despite Q1 Sales Miss

Finish Line
Finish Line
Courtesy photo

Shares for The Finish Line Inc. are gaining in early-morning trading — up more than 9 percent to $13.88 as of 10:30 a.m. ET — on the heels of the specialty-athletic retailer’s first-quarter earnings release.

The Indianapolis-based firm said today that its Q1 sales slipped 0.1 percent year-over-year to $429.8 million, which missed analysts’ bets for sales of $434 million.

Comparable store sales also fell 1.1 percent during the period, faring better than market watchers’ expectations for a comp decline of 1.6 percent.

Profits tumbled 15 percent over the previous year to $8.1 million, or 20 cents per diluted share. Adjusted profits held steady at 23 cents per share and were also in line with analysts’ predictions.

During the firm’s conference call, Finish Line CEO Sam Sato noted continued growth in the retailer’s Macy’s business — which saw a sales gain in the mid-teens during the first quarter.

“We are heavily focused on increasing our level of personalization across all marketing channels, placing relevant content and offers in front of our customers where they are and when they are ready to shop,” Sato added. “On the store front, we continue to roll out our new format featuring a bold modernized design palette, including the complete refresh of the Finish Line logo, storefront, floor fixture and shoe walls.”

Sato said that in the year ahead, the firm will focus on improving its merchandising assortment to “better excite our customers and further distinguish the Finish Line brand in the marketplace as the destination for the latest and greatest sneakers.” (Sato’s comments come after the firm’s stock took a hit this week as investors ditched athletic retail stocks, fearing that a potential Nike-Amazon deal could hurt the brand’s brick-and-mortar partners.)

Digital and mobile, Sato said, will also be a major priority.

“Our focus for fiscal year ’18 is to continue delivering frictionless experiences that lead with mobile … We are also enhancing our infrastructure and integration to better leverage our customer data,” he said.

Finish Line CFO and EVP Edward Wilhem reiterated the firm’s fiscal ’18 guidance, expecting adjusted earnings per share to be in the range of $1.12 to $1.23 based on Finish Line comp sales increasing low-single digits and its Macy’s business generating between of $345 million and $355 million in sales with an operating margin in the high single digits.

While the firm does not provide quarterly guidance, he provided commentary on trends affecting the business over the remainder of the year.

“Starting in Q2, while comp trends have returned to positive territory in June, we are being cautious with our outlook based on the current retail environment,” Wilhem said. “We face a mismatch in the product launch calendar that will be a challenge late in the second quarter. Therefore, we are planning Q2 comps down low single digits. As a result, gross margins our forecasted to be down year-over-year, similar to the decline we experienced in Q1, while SG&A will deleverage approximately 100 basis points due to increased incentive compensation costs.”

In the back half of the year, Finish Line comps are expected to increase low single digits, and back-half earnings growth will be concentrated in the fourth quarter, he adde