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Finish Line CEO Talks Running, Retail & Other Big Issues

Finish Line Inc. and its acquisition-hungry arm, Running Specialty Group, are sprinting from one deal to the next.

The subsidiary of the Indianapolis-based retailer last week added to its collection of independent stores by purchasing JackRabbit Sports, a New York-based chain that is influential in the running and triathlon communities, for an undisclosed amount.

It was the third deal in two weeks for RSG. First it bought two Striders doors in Utah, and days later it snapped up Midwest retailer Indiana Running Co. The combined deals boosted RSG’s portfolio to 75 stores in 16 states.

For Glenn Lyon, chairman and CEO of Finish Line, the acquisitions reflect the retailer’s goal “to be a dominant force in the running specialty world.”

And according to company brass, the deals are part of a bigger plan that includes broadening Finish Line’s omnichannel reach, fine-tuning the in-store product mix, tweaking its running-specific Nike Track Club shop-in-shop concept and beefing up the offerings of its online and in-store partnership with Macy’s.

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Some analysts, however, aren’t quite as enthusiastic about the recent moves.

“They’ve simply got too many balls in the air between Macy’s, running specialty and the big Finish Line business — they’re hurting the mothership,” said Sterne Agee analyst Sam Poser. “There’s not that much mindshare to go around. Foot Locker is taking it to them and gaining share because they are far more focused.”

While Finish Line executives acknowledged facing some “headwinds” last year, they believe the company’s strategy to be in constant contact with consumers is the right way to go.

“We pride ourselves on offering a broad assortment in the marketplace, wherever the customer shops,” Lyon said.

In a joint interview, Lyon and President Sam Sato weighed in on where Finish Line is headed.

 

You’ve made a number of recent buys through RSG to strengthen your position in the category. How will the moves pay off?

GL: We ventured into running specialty [in 2011]. We recognized that we had a lot of knowledge and core competencies that could relate to that business. The heritage of Finish Line comes out of a group of runners who were the founders, and it has been a focal point of our evolution. We have that knowledge, along with the understanding of store operations in a world that is really a mom-and-pop world. Our ability to put infrastructure behind this business, both operationally and merchandise-wise, we thought was a clear opportunity for us to be a dominant force in running specialty. We entered the marketplace at a point when health and wellness were becoming critical to everybody’s life. Spinning, yoga, gyms, health foods — these will all be the centerpieces of what society looks like in years to come, and we have to be there.

 

With so much focus on running, how concerned are you that marquee basketball product is hotter right now?

GL: We’ve been in this business a long time. Cycles happen. We’re there to give customers what they want, by category, at all points in time. We’ve certainly lived through the cycles — running versus basketball, running versus lifestyle. There’s no question that basketball shoes are stronger. It’s our job to work with our brand partners to make sure we work as part of an entire market-place, to keep it healthy and not duplicate the efforts of competitors. But make no mistake, we need to be on-trend for our core customer.

 

Speaking of competitors, Foot Locker has Runners Point Group. How are you differentiating from them as well as from your other businesses?

GL: One of the things that encouraged us to go into the running-specialty business is that there’s very little cross-shopping going on. The customer at running specialty is 85 percent to 90 percent about function. The customer at Finish Line is 85 percent to 90 percent fashion-driven. There is no overlap. And I’m sure it’s the same for our competition, even though their impact is overseas.

SS: Our Macy’s business unit also addresses a different consumer demographic. It’s essentially 65 percent women’s, and in mall specialty/athletic specialty, it’s a much smaller percentage. So that represented a nice strategic expansion for us to address the consumer we weren’t addressing from both a performance and a fashion perspective.

 

What’s the latest with the Macy’s initiative?

SS: We are all but complete with our rollout in about 400 Macy’s stores. We’ll continue to work with Macy’s closely on locations and improving those where we see growth opportunities. The real expansion is going to come in both category [enlargement] — there is an opportunity to boost our presence in kids’ athletic footwear — and to grow our business on Macys.com. In our last quarterly call, we said we were testing an omnichannel-fulfillment strategy that allows consumers to come to Macys.com and see inventory that’s in our warehouse as well as inventory that was, at that time, in 50 of our Macy’s pilot stores. We have expanded that to 100 stores this spring. The incremental lift in sales because of that inventory becoming visible has been tremendous.

 

On a related front, you recently hired a chief omnichannel officer. Why was that necessary?

SS: [It was important] for us to not only compete but be authoritative and relevant to our target customer. Delivering this seamless experience across multiple touch-points was something that Glenn early on deemed critical to our future path. [Our new chief omnichannel officer, Imran Jooma] will have direct oversight of the customer-facing touch-points. He’s charged with ensuring that we bring a consistent, seamless and, most important, relevant experience to the customer.

 

What omnichannel initiatives are on the way?

SS: We’ve got a pretty robust roadmap for how we’re going to implement different pieces of the strategy, which includes both front-of-the-house and back-of-the-house infrastructure. From a back-of-the-house perspective, we’ve got critical deliverables coming up, starting with our new supply-chain system. For front of the house, we continue to make investments against our mobile application and our engagement with customers via the mobile device.

 

What’s the state of today’s retail climate?

GL: The consumer is in a pretty good place, if you forget about the weather, which will all square itself up. For the premium end of the business that we trade in, as long as we give them new, they get excited and they buy it with great vigor. I’m optimistic about our position in the marketplace and about the customer’s mindset.

 

We’re seeing lower gas prices and stronger employment numbers. How is that affecting consumers’ purchasing decisions?

GL: Strangely enough, it’s more about the product and the excitement that is generated through the product. We didn’t see [sales drop] off when gas prices went up, and we haven’t seen things change since gas prices have come down. But we do see a difference when we hit the store with new, innovative styles. That’s something that increases sales immediately.

 

What brands are generating excitement right now?

GL: Obviously, Nike continues to be the consumer’s first choice. And from there, we pride ourselves on maintaining a strong position with all of the key athletic brands, whether they’re new ones, such as Under Armour, or the more traditional ones, like Adidas, Brooks and Asics. We pride ourselves on carrying a broad assortment in the marketplace, and we think that differentiates us.

 

What’s the biggest challenge facing Finish Line today?

GL: Finding the newest, the latest and the greatest — that’s always the challenge. It never changes. When we’re on the mark in regard to product trends, we win.

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