B Riley FBR raised its price target on The Finish Line from $10 to $11 due to its better-than-expected results for the third quarter ended November 25.
The investment boutique reiterated its “Neutral” rating on the stock.
“We believe management sounded more positive on the outlook for more innovation and product newness for the end of 2017/beginning of 2018, though new product will likely still have a smaller impact due to penetration until F2H19,” wrote Susan Anderson in a note to clients. “3Q showed nice improvement, with comp sales positive for the first time this fiscal year, as well as GM and SG&A improvement,”
The analyst also believes Finish Line is starting to benefit from investments in its digital strategy, with digital traffic expanding and total digital sales ahead in the high-single digits in the quarter. The Macy’s in-store shop business also outperformed in the quarter.
Anderson noted that management, however, expects same-store sales to remain negative in the fourth quarter and markdown sales will be harder to move the comp versus the third quarter. Given the headwinds facing the industry, the potential for a slowing athletic footwear cycle, and the outlook for a continued promotional environment, she reiterated her “Neutral” rating despite the higher price targets.
Excluding store impairment charges in both periods, the adjusted net loss for Finish Line was $10.3 million, or 26 cents a share, in the third quarter against $9.9 million, or 24 cents, in the year-ago period. Finish Line had forecast EPS in the range of a loss of 32 to 40 cents.
Finish Line comparable store sales increased 0.8 percent, also better than guidance calling for comps to decrease 3 to 5 percent.
B Riley said its fourth-quarter estimate remains at 56 cents a share. The fiscal 2018 estimate climbs from 55 cents to 66 cents due to the above-plan third quarter. Its fiscal 2019 estimate increased from 60 cents to 72 cents.
Photo courtesy The Finish Line
