The Finish Line 2nd quarter net sales were $341.6 million, an increase of 9% over net sales of $312.2 million for Q2 last year. Comparable store net sales for Q2 decreased 2% as compared to an increase of 6% reported for the comparable thirteen-week period last year.
The Company is lowering Q2 earnings guidance due to the decrease in sales, product margin pressure resulting from a more promotional environment, as well as negative leverage on occupancy costs and SG&A. SG&A was negatively affected by a reserve of $1.5 million, or $.02 per share after taxes, related to legal matters regarding alleged civil violations of California wage and hour laws.
The Company's new guidance for diluted earnings per share for Q2 is a range of $.37 to $.39 compared to previous guidance of $.48 to $.50 per diluted share. The Company earned $.42 per diluted share for Q2 LY.
On a year-to-date basis, for the twenty-six weeks ended August 27, 2005, net sales were $632.9 million, an increase of 11% over net sales of $570.1 million reported for the twenty-six week period last year ended August 28, 2004. Year-to-date comparable store net sales were flat as compared to the 10% increase reported for the first half of last year.
Alan H. Cohen, (Chairman and Chief Executive Officer) stated: “Although we started the quarter with sales on plan for most of June, sales from late June thru the remainder of Q2 were disappointing. Footwear comp store sales were flat for the quarter while softgoods comped down 8%. For the Back-to-School season, the promotional environment in the mall has been increasing weekly, and we have reacted with increased price promotions in our stores to remain competitive. In spite of lower than expected sales, we have worked diligently to keep our inventories in line and expect to report an increase of 1-3% per square foot at the end of Q2 compared to Q2 LY.”
Given the slowing footwear and softgood sales trend in addition to the continuing increase in the promotional environment, the Company believes it is prudent to reduce its guidance for the remainder of the year. For Q3, sales are expected to be approximately $262 million based on a flat comp sales plan and diluted earnings per share to be a loss in the range of -$.01 to -$.03, compared to previous guidance of income in the range of $.05 to $.07 per diluted share. Q4 sales are expected to be approximately $401 million based on a flat comp with diluted earnings per share in the range of $.56 to $.58, compared to previous guidance of $.64 to $.66 per diluted share. For the full fiscal year, sales are expected to approximate $1.3 billion with diluted earnings per share in the range of $1.16 to $1.21. Last year the Company reported full year diluted earnings per share of $1.24.
