While shares of Finish Line Inc. were hit hard in late March after the company indicated that heavy investments in its technology and stores as part of its 'omni-channel” strategy would crimp in the current fiscal year, management is not only optimistic that the efforts will reap benefits in the end but stressed they were necessary.
“There are no choices,” said Glenn Lyon, Finish Line's CEO, last week at Citi Global's Consumer Conference. “There aren't choices to wait. There aren't choices to be second in line. If you are going to compete in this world, and if you're going to get the attention of not only the consumer but of our brand partners, and that does include the landlords. It does include all the people we do business with in the digital world, including Google and the rest of them, if you're going to compete you have got to compete on that plane.”
Recalling his 40-year retail career, including 30 on the apparel side, he likened the mobile impact to changes in the 60's that brought the shopping mall into existence, followed by direct mail's push in the 70's and 80's, and Internet immersion over the last 10 to 15 years. The newest phase Finish Line is looking to be at the forefront of combines all of those channels that Lyon views as more 'omni-channel' than 'multi-channel.' Said Lyon, “If we don't put all of those things together and enable our customer to shop with us and do commerce with us, whether it's through their home computer, their tablet, their telephone, or if indeed they want to get in their car and go to the mall and fight the parking and all of that stuff, if they want to do that we're happy to have that.”
He remarked that just the digital part of its business could be in excess of 25 percent of Finish Line's business by 2016 under its five-year plan, hitting $450 million. “But if you had asked me that question a year ago, I would have told you I thought the universe was $250 million. So, that's the dynamic. That's how much the world is changing today. And I think we're going to see a completely new landscape. And we want to be out in front of it.”
As reported, Finish Line is accelerating the pace of investments in its omni-channel strategy, leading to a nearly three-fold hike in capital expenditures to approximately $85 million in fiscal 2013, up significantly from $29 million in fiscal 2012.
Of the expected $80 million to $90 million in capital expenditures expected in its current fiscal year, about half will be spent on technology and half in its brick & mortar business, Ed Wilhelm, Finish Line's CFO, said at the conference. On the brick & mortar side, $17 million is expected to be used open 25 to 30 stores, representing the first time in 4 or 5 years that company will open more stores than they close. Between $12 million to $15 million will be spent on repositioning 15 to 20 stores this year. Another $15 million to $20 million will go to remodel up to 20 stores this year, including expanding the
Nike Track Club concept as well as adding Jordan and Adidas shops as part of a new format. Said Wilhelm, “You will see the brands popping in a much bigger way in this new format.”
On the technology side, about $8 million will represent investments in a CRM system that will enable the company to better leverage content. Another $13 million to $15 million will be spent new POS system in stores and rolling out handheld devices for sales associates as well as tablets that customers can interact with themselves. Said Wilhelm, ” Our capital needs peak this year in FY '13. We'll take a step down next year in '14, and then a further step down in '15 before we get to what we call more normalized levels.”
Lyon added that one of the enablers in its strategic plan is that the competitive landscape has become healthier. Added Lyon, “I think the athletic footwear business has condensed probably closer to 500 stores, but for sure 400 stores in America, mainly between Foot Locker and us. But also others who have either gone out of business or are no longer part of the distribution channels that we have with the athletic brands.”
Noting that he agrees with Foot Locker's CEO “on a lot of stuff,' Lyon added that even the head-to-head mall competition between Foot Locker is more rational than in past years. Lyon stated, “I think that we're peacefully coexisting in the marketplace. I think they have enabled us to do better, and I think we play as good citizens and we want to see the brands and we want to see the sell-throughs at regular price inventories a rational for both of us. And I think it has worked great.”
