If exclusive marquee footwear product got people in the door at The Finish Line, they loaded up on Licensed Apparel once they got in the store, with the category reportedly “white-hot” everywhere and Reebok the primary beneficiary of a fashion trend that is in full swing.
The Licensed Apparel fuel drove fiscal Q2 comp store sales in FINLs Apparel/Accessories category up 38% on top of an 18% gain LY. The gains came throughout the quarter, with June up 32%, July jumping 46% and August reporting a 39% comp increase.
Basketball, Casual and Running drove footwear comp gains up 18% for the quarter. The gains increased as more exclusive product arrived and the mall retailer distanced themselves from the competition, with June gaining 11%, July up 13% and August closing the quarter with a 27% comp increase in footwear.
Year-to-date, Footwear is comping up 14% and apparel is up 38% on a comp basis.
Total net sales for the second quarter rose 33% to $271 million and comp store sales followed the footwear pattern, gaining 15% in June, up 19% in July and increasing 29% in August.
The average selling price in Q2 was down 1% on mix change with more sales coming from retro and kids.
Inventory levels are expected to be up 7% – 9% per square foot at the end of the quarter to meet Q3 demand. FINL said 85% of the inventory is less than 6 months old and that GM was up over LY on improved merchandise margins and leveraged occupancy costs.
FINL is now forecasting EPS of 70 to 72 cents for the second quarter, compared to the previous guidance of 42 to 44 cents and year-ago EPS of 37 cents. For the year, the company has increased EPS guidance from a previous range of $1.16 to $1.21 to a new range of $1.52 to $1.56
“We think they're going to keep doing this for at least another six months or so,” said Robbie Ohmes, an analyst at Banc of America Securities. Ohmes' team of researchers raised their target price for Finish Line by $2 per share to $30. (See the Ohmes report in SEW 0333)
Not everyone agreed, as FINL shares fell 6.7% for the week to close at $25.30 on Friday. Ohmes explained some of the decline on profit-taking and a “tough day” for consumer-related stocks, but Merrill Lynch became the fly in the ointment on Friday, cutting its rating on the retailer to “neutral” from “buy”.
“Though we expect the company's incredibly strong performance to continue near term, this appears increasingly baked into the share price,” Merrill told clients in a note.
>>> Makes us wonder what Merrill is baking into their brownies
