Late B-T-S Season Hampers Finish Line

NEW YORK — While September is shaping up to be a better month for most footwear retailers, The Finish Line Inc. felt the pain of a quiet July and August in its second-quarter results.

“Customer traffic was really challenging in the second quarter,” said Edward Wilhelm, CFO at the Indianapolis-based retailer. “When we got the customer in the store, we were successful, but from a top-line perspective, it was a challenging quarter.”

Same-store sales for the quarter dropped 9.9 percent, compared with a 4.9 percent increase in the same period last year, but Wilhelm pointed to an upticking trend throughout the quarter, which could bode well for September sales. “The second quarter doesn’t reflect all the back-to-school shopping because of this year’s late Labor Day,” he said.

Sam Sato, Finish Line’s chief merchandising officer, said b-t-s promotions have been “about what we expected. We see a continuation of price compression, but at the same time, products that are new and relevant are still selling well at regular price.”

Christopher Svezia, senior footwear research analyst at Susquehanna Financial Group, said he believes the Finish Line story is no different than any other retailer’s during the second quarter, as “people shopped later this season and waited for more of a need.”

The analyst did point out that Finish Line has been running a clearance event for most of September, just as it did last year, and he fears promotions could continue at the chain and other retailers through the remainder of the year. “Even with tight inventories, we don’t see that promotional cadence changing in the mall,” he said.

Svezia praised Finish Line’s cost-cutting efforts, though, pointing to a reduction in occupancy costs, administrative expenses and inventory.

The company said that consolidated merchandise inventories were down 18 percent at the end of the quarter versus the year-ago period, while inventory on a square-foot basis was down 10 percent in stores.

Finish Line reported a second-quarter loss of $900,000, or 2 cents a share, due to a charge of $12.6 million, or 23 cents a share, from the discontinued operations of its Man Alive unit. During the second quarter of 2008, the company posted a profit of $13.1 million, or 24 cents a share.

Second-quarter sales dipped 11 percent to $298.7 million, from $337 million in the year-ago period.

For the first half of the year, the company’s net loss totaled $1.5 million, or 3 cents a share, compared with a profit of $14 million, or 26 cents, in the first six months of 2008. First-half sales dropped 9 percent to $557.8 million, from $610 million in the year-ago period.

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