Finish Line Beats Estimates; Raises Outlook

Finish Line inc. raised its guidance for the full year following better-than-expected sales and tighter cost controls in the third quarter.

The company lifted its comparable-store sales growth forecast to between 3 percent and 4 percent, compared to its previous expectation for a low single-digit increase. 

“The strong result was driven by the performance in our stores and our ability to convert customers into buyers,” Finish Line CEO Glenn Lyon said in an interview.

“Every one of our key brands are all bringing us new technologies or new designs, and that gives us a lot of confidence about 2014,” Lyon said, adding that the firm’s running, basketball and training offerings contributed to the strong quarterly result.

Finish Line posted a net income of $2.3 million for the third quarter, or 5 cents a diluted share, compared with a loss of $107,000 in the year-ago quarter.

Excluding the impact of impairment charges, earnings were 6 cents a share, beating analysts’ consensus forecasts of 1 cent. Revenue increased to $364.5 million, up 22.9 percent from a year earlier, beating analysts’ consensus forecasts of $354.6 million.

Finish Line predicted adjusted earnings will increase between 9 percent and 12 percent, to $1.60 to $1.65 per share. That is higher than its prior guidance of a mid-single-digit increase.

Analysts reacted positively to the result, in particular to recent innovation in the retailer’s product mix. Camilo Lyon, an analyst with Canaccord Genuity, said, “We believe continued strength in basketball, coupled with a resurging running category, is benefiting Finish Line.” He noted the company could continue to benefit as it gains traction with its distribution initiatives and omnichannel strategies.

Lyon said Finish Line’s sales for the holiday season were up in the mid-single digits, driven by strength in its digital business.

“Looking forward, we are increasingly confident that our omnichannel strategies are working and that our connectivity to the customer across all channels is strengthening,” he said.

Christopher Svezia, an analyst at Susquehanna Financial, said improvements in the company’s product range created better leverage. “The fact that the running business regained some momentum and the women’s business improved were two positive surprises,” he said. “Overall, despite the broader retail challenges and heightened promotional activity, it seems footwear is doing better than other apparel categories.”

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