The Finish Line, Inc. reported consolidated net sales increased 10 percent in the first quarter ended June 1, but earnings plunged as it continued to absorb costs associated with the launch of its store-in-store partnership with Macy’s.
Net sales reached $351.1 million on a 2.4 percent increase in comp store sales.
Gross margin declined 230 basis points to 30.5 percent. SG&A expenses increased 17.2 percent to $93.4 million, or 28.3 percent of revenues, up 170 basis points from a year earlier level.
Operating income plunged 62.1 percent, falling to $7.47 million from $19.8 million, resulting in net income of $7.5 million, or 10 cents of diluted earnings per share. On a non-GAAP basis, which excludes the impact of start-up costs related to the company’s launch of its business at Macy’s, diluted earnings per share were 20 cents.
As of June 1, 2013, consolidated merchandise inventories increased 23.7 percent to $292.6 million compared to $236.5 million as of June 2, 2012 as the company prepared for the start-up of its Macy’s business.
“We are pleased with the start to Fiscal 2014 as improving trends in our Finish Line running business combined with continued strength in basketball and disciplined expense management drove our results,” said Chairman and Chief Executive Office Glenn Lyon. “Strategically, the quarter was marked by significant progress on our key growth initiatives including the well-received launch of our Macy’s business in stores and online and the expansion of the Running Specialty Group footprint with the acquisition of some very productive doors. We have clear vision and sound strategies in place to transform our company into a premier, multi-divisional, omni-channel retailer and drive increased value for our shareholders,” Lyon added.
For the fiscal year ending March 1, 2014, the Company still expects Finish Line comparable store sales to be up slightly and earnings per share to increase mid-single digit percent over fiscal year 2013 Non-GAAP diluted earnings per share of $1.47.
The Finish Line, Inc. | |||||||||||||
Consolidated Statements of Income (Unaudited) | |||||||||||||
(In thousands, except per share and store/shop data) | |||||||||||||
| Thirteen Weeks Ended | |||||||||||||
| June 1, | June 2, | ||||||||||||
| 2013 | 2012 | ||||||||||||
| Net sales | $ | 351,054 | $ | 319,049 | |||||||||
| Cost of sales (including occupancy costs) | 244,059 | 214,390 | |||||||||||
| Gross profit | 106,995 | 104,659 | |||||||||||
| Selling, general and administrative expenses | 99,356 | 84,846 | |||||||||||
| Store closing costs | 186 | 95 | |||||||||||
| Operating income | 7,453 | 19,718 | |||||||||||
| Interest income, net | 15 | 71 | |||||||||||
| Income before income taxes | 7,468 | 19,789 | |||||||||||
| Income tax expense | 2,953 | 7,708 | |||||||||||
| Net income | 4,515 | 12,081 | |||||||||||
| Net loss attributable to redeemable noncontrolling interest | 561 | 197 | |||||||||||
| Net income attributable to The Finish Line, Inc. | $ | 5,076 | $ | 12,278 | |||||||||
| Diluted earnings per share attributable to The Finish Line, Inc. shareholders | $ | 0.10 | $ | 0.24 | |||||||||
| Diluted weighted average shares | 48,732 | 51,403 | |||||||||||
| Dividends declared per share | $ | 0.07 | $ | 0.06 | |||||||||
| Finish Line store activity for the period: | |||||||||||||
| Beginning of period | 645 | 637 | |||||||||||
| Opened | 10 | 9 | |||||||||||
| Closed | (4 | ) | (6 | ) | |||||||||
| End of period | 651 | 640 | |||||||||||
| Square feet at end of period | 3,531,314 | 3,457,170 | |||||||||||
| Average square feet per store | 5,424 | 5,402 | |||||||||||
| Branded shops within department stores activity for the period: | |||||||||||||
| Beginning of period | 3 | – | |||||||||||
| Opened | 41 | – | |||||||||||
| Closed | – | – | |||||||||||
| End of period | 44 | – | |||||||||||
| Square feet at end of period | 41,995 | – | |||||||||||
| Average square feet per shop | 954 | – | |||||||||||
| Running Company store activity for the period: | |||||||||||||
| Beginning of period | 27 | 19 | |||||||||||
Acquired | 9 | – | |||||||||||
| Opened | 2 | – | |||||||||||
| Closed | – | – | |||||||||||
| End of period | 38 | 19 | |||||||||||
| Square feet at end of period | 117,614 | 57,302 | |||||||||||
| Average square feet per store | 3,095 | 3,016 | |||||||||||
