Finish Line Guides Down for Q1

Finish Line Inc. slightly missed expectations on fourth-quarter earnings, but beat on revenue.

The Indianapolis-based retailer said it expects first-quarter earnings per share to be down about 30 percent, based on expected capital expenditures, lower product margins and higher occupancy costs. The company’s shares plunged 13.5 percent in Friday morning trading.

For the period ended March 3, the retail chain earned 80 cents a share on revenue of $456.3 million. Analysts were expecting EPS of 81 cents on sales of $432.6 million, as polled by Yahoo Finance.

In the same period a year ago, EPS was 63 cents on revenue of $384.6 million.

Finish Line said comparable-store sales increased 10.8 percent in the quarter, driven by e-commerce, which surged 38.3 percent. Store comps were 7 percent. The firm expects first-quarter comps to be up in the mid-single-digit range. 

Glenn Lyon, Finish Line’s chairman and CEO, said the firm’s priority in 2013 is to ensure it becomes a sustainable multi-division, all-channel business for the future. This will in the near-term involve additional investments, including “first, a total technology transformation,” he said on a conference call with analysts.

“[That] includes everything from backbone systems, such as our merchandise and supply chain systems, to an overhaul of POS in our stores. Second, [we will make] major investments in human capital, technology and marketing necessary to fuel our omni-channel strategy; and third, a significant investment in stores related to new-store growth and remodels, as well as technology being brought into our locations,” he added.

Capital expenditures in fiscal 2013 are expected to total about $85 million, up from $29 million in fiscal 2012. That will also facilitate opening 25 new stores.

For the full year, Finish Line’s EPS increased 26.2 percent to $1.59, with net income rising 23.3 percent to $84.8 million. Revenue advanced 11.4 percent to $1.37 billion on a comps increase of 9.2 percent.

Separately this morning, Finish Line announced a joint venture with Gart Capital Partners to create what both parties call “the nation’s single-largest operator within the growing specialty running business, a market that has been estimated at up to $1 billion.”

Gart, a private equity firm that has partnered with Vail Resorts Inc., will invest $10 million in Finish Line’s Running Specialty Group, which currently has 18 doors operating under its Running Company banner. One of the objectives for the group to launch Run.com, a digital experience for runners that is said to be the segment’s first to marry content, community and commerce, this spring.

The group’s headquarters will be relocated to Denver, where GCP will manage all day-to-day operations, as well as merchandising and the acquisition of additional running retailers from its home base there.

“Like the ski retail business, customers within specialty running prize a shopping experience that is expert, highly localized and infused with the sport’s unique culture. Maintaining the individual personality of each running store concept, while providing the synergies of larger-operator systems and back office support, is critical for success,” said Lyon. “GCP is contributing not only management expertise, but also capital. We believe this is the optimal way for us to harness the potential of the specialty running market.”

Finish Line also said it would be more aggressive with share repurchases this year, as well as continue to grow its dividend.

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