Finish Line Shares Fall After Q4 Sales Decline More Than Expected

A few days after European giant JD Sports Fashion Plc said it would acquire Finish Line Inc., the U.S. athletic retailer is seeing shares fall this morning — after fourth-quarter sales missed the mark.

For the period ended March 3, the retailer reported net income of $16.3 million, reversing its loss from the year-ago period. Diluted earnings per share were 40 cents, which included impact from impairment charges and store closing costs and the company’s revaluation of its deferred tax liability as a result of the Tax Cuts and Jobs Act. (On an adjusted basis, earnings per share were 59 cents.)

Overall sales were $561.3 million, an increase of 0.7 percent over the prior year. But same-store sales fell 7.9 percent, which was steeper than expected. On the bright side, Finish Line’s Macy’s business reported an increase of 8.5 percent.

“While we anticipated that our business would be under pressure during the fourth quarter due to a difficult selling environment for athletic footwear, sales ended up being down more than we forecasted,” CEO Sam Sato said in a statement. “Despite the top-line headwinds, we worked hard on tightly controlling costs and managing inventories to deliver adjusted earnings per share for the fourth quarter at the high-end of our most recent guidance range of 58 to 59 cents.”

For the full year, Finish Line’s net sales were $1.84 billion, a decrease of 0.3 percent from the prior-year period.

JD Sports’ $558 million deal would give the European powerhouse 100 percent of the issued and outstanding Finish Line shares at a price of $13.50 apiece in cash. It would also allow JD to establish a major foothold in the U.S. market and assist in Finish Line’s rebound in the athletic goods sphere. The merger agreement is expected to close in June.

Finish Line said it counts 556 stores, compared with the 573 a year ago. During the quarter, the company opened 11 stores and closed one.

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