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Analysts Upbeat on Finish Line

A robust product mix and continued strength in the athletic cycle is expected to benefit The Finish Line Inc. in the current fiscal year, according to analysts.

Following a better-than-expected result for the fourth quarter, market watchers said new product from several brands — including Nike, Under Armour, Adidas and New Balance — should drive strong sales at the company this year.

“Nike, which constitutes about 65 percent of Finish Line’s sales, continues to be strong. … The strength of a broad number of brands is beneficial to specialty retailers such as Finish Line, who curates product to reflect their customer base,” Sterne Agee analyst Sam Poser wrote in a note to clients.

Poser lauded the firm’s plan to expand on its partnership with Macy’s Inc. this year.

“Macy’s shop-in-shops are expected to contribute $175 million to $195 million in revenue [this fiscal year], with a 220-shop rollout in fiscal 2015,” he wrote, noting that the additional stores should materially improve the partnership’s sales and margin productivity this year.

On Finish Line’s guidance for the full year, UBS analyst Steven Strycula wrote in a note to clients, “In our view, solid fourth-quarter execution in [the retailer’s] core businesses, plus conservative fiscal 2015 guidance, creates a more favorable outlook for the stock, especially as key selling, general and administrative investments — at Macy’s and [in technology] become more leverageable toward year-end,” he said.
For the fiscal year ending Feb. 28, 2015, Finish Line expects comparable-store sales to be up mid-single digits and earnings per share to increase in the high single- to low double-digit range versus fiscal 2014 non-GAAP diluted EPS of $1.66.

Mitch Kummetz, an analyst at Baird Equity Research, lowered his fiscal 2015 EPS forecast to $1.85, from $1.87, on the back of the company’s conservative guidance.

“Most of our concerns around the running category heading into the report are now more muted following Finish Line’s encouraging results and upbeat tone on the product pipeline, [with] further rollouts from Nike, Adidas and Under Amour,” he wrote in a note to clients.

Chris Svezia, an analyst at Susquehanna Financial Group, also wrote in a note that he expects the inflection in the company’s product margins will lead to a sustainable margin recovery in Finish Line’s core business this year.

“Product margins turned positive after seven quarters of decline. We see opportunity for this to continue, leading to upside to management’s outlook,” said Svezia.

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