Finish Line Profit, Sales Spike Amid Margin Expansion

Finish Line Inc.’s first-quarter profit more than doubled on the prior corresponding period on higher sales and its expanding customer base, driven by the company’s growing shop-in-shop presence in Macy’s Inc.

Finish Line posted earnings of $12.4 million, or 25 cents a diluted share, in the first quarter, up from $5.1 million, or 10 cents, year-on-year. Excluding impairment charges related to the launch of the company’s operations in Macy’s, per-share earnings were 28 cents.

Sales for the period rose 16 percent to $406.5 million. Analysts polled by Thomson Reuters had expected revenue of $394 million on EPS of 21 cents. Finish Line shares were 1.9 percent, or 54 cents higher, at $29.69 in midday trading.

“The integration of our store and digital operations is allowing us to deliver great product and service to consumers in a seamless fashion no matter what channel they choose to shop,” said Glenn Lyon, the company’s CEO, discussing Finish Line’s omnichannel efforts.

“At the same time, we are reaching new consumers and expanding market share through our growing relationship with Macy’s,” Lyon said, adding, “We are confident that our multidivisional, omnichannel strategies will strengthen our market position and drive growth in sales and earnings, allowing us to return increased value to our shareholders in the years ahead.”

The company reiterated its guidance for fiscal 2015 for comparable store sales growth in the mid-single digits.

UBS analyst Steven Strycula lauded the company for delivering strong same-store sales growth in the first quarter amid sluggish mall traffic and challenging weather trends.

“Following Nike reporting solid North America futures of more than 11 percent [yesterday], we believe specialty athletic footwear retailers such as Finish Line should benefit from a rich pipeline of innovative products in coming quarters,” Strycula said.

“That said, recent checks point to stepped-up markdown cadence on several high-ticket running stock keeping units, which likely pressured gross margins in the first quarter,” he added.

On a conference call with investors and analysts, Lyon said the robust quarterly result was driven by sequential improvement in running trends and the ongoing strength of basketball.

“From a brand perspective, results were strong across the board, led by Jordan, Nike signature products from LeBron [James] and Kevin Durant, as well as retro styles from Reebok, Adidas and Fila,” he said.

“The early signs that running trends are improving, combined with continued strength in basketball, make us confident that we’re well-positioned to deliver on our strategic and our financial goals for the year,” he added.

On the outlook for Finish Line’s shop-in-shop partnership with Macy’s, company CFO and EVP Edward W. Wilhelm said, “In fiscal 2017, we expect our Macy’s business to generate revenue of $250 million and Running Specialty Group to contribute $200 million to our consolidated results.”

Wilhelm added, “Driven by this top-line growth and the disciplined capital allocation strategy, we expect to generate an adjusted bottom line, compounded annual EPS growth rate in the low-teen range over the next four years.”

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