After a tough year maligned by the botched acquisition of Genesco Inc. as well as sluggish footwear sales, The Finish Line finally delivered some good news last week with better than expected results for its fiscal first quarter ended May 31.  A surge in sales in April and May led The Finish Line to a 0.7% sales gain in the quarter.

 
By month, comps for the Finish Line chain decreased 5.6% in March, but increased 7.6% in April – reflecting the Easter shift – and jumped 6.6% in May.


On a conference call with analysts, Alan Cohen, FINL chairman and CEO, cited improved assortment planning and inventory management, noting that the company was able to reach all of its targets in merchandising by growing revenue and product margins, improving inventory turns, and reducing aged inventory to levels lower than they have been for many years.


The 190 basis point increase in gross margins consisted of a 200 basis point increase in product margins, partially offset by a 10 basis point increase in occupancy costs. The gain reflected improved margins at both Finish Line (up 190 basis points) and Man Alive (up 440 basis points) as both divisions improved their aged inventory and inventory mix. The SG&A expense rate was flat as increased store payroll costs equaled lower depreciation, supplies, and freight expenses.

 
But Cohen also said consumers are responding well to its continued focus on premium performance and sports style products in the Finish Line stores. This helped drive higher product margins and increased ASPs during the quarter.

 
For the quarter, footwear comps at Finish Line increased 2.8%.  Broken down, footwear comps in March decreased 4.9% while April increased 8.8%, and May climbed 8.5%.  Footwear ASP’s increased 4.8% for the quarter.

 
Among footwear categories, running was up in men's and women's following a strong performance in its prior fourth quarter.  Cohen called out Nike Shox and technical running footwear from Asics, Brooks, Saucony, Mizuno. He said the Nike Bowerman series were also strong during the quarter. The running footwear average selling price and sell-through both showed improvement.


In basketball, Jordan continued to pace sales, including retro, game, Finish Line exclusives, and in-line. Jordan's sales, turns, margin, and average selling price all improved during the quarter.  The launch of the Under Armour training shoes delivered double-digit sell through, which has remained consistent since its launch.


As planned, the “sports style” category was down low-single-digits for the quarter, with inventories down double-digits. But the increased productivity of this inventory drove margins up 210 basis points for the sub-category.  In men's, Finish Line saw continued strengthening in Lacoste, Chuck Taylor’s, and Nike during the quarter.  Men's sandals exceeded plan with gains in slides from Jordan, Under Armour, and adidas.  Women's sandals sales “have not been as robust,” said Cohen.


Kids experienced strong performance in most brands, but was down mid single-digits overall for the quarter with inventory down low double-digits. Excluding Heelys, kids was up 18%. These increases were driven in large part by Jordan, Chuck Taylor, Under Armour, Lacoste, and Polo. Cohen said Finish Line expects a better comparison against Heelys to begin after BTS.


In softgoods, comps at Finish Line decreased 5.2% for the quarter, but gross margin dollars were up with inventories more current and down approximately 16% on a per square foot basis.  Apparel comps decreased 9.8% in March, increased 0.7% in April, and decreased 4.2% in May. Finish Line said apparel is being driven by basic, core, replenishable, branded and private label items such as T-shirts, shorts and socks. Finish Line is also seeing success with Under Armour and Nike’s LIVESTRONG program, as well as some new graphic T-shirt vendors.


Man Alive's comp decline reflected the Easter shift and the exiting of the footwear business. March comps decreased 21.4% and April's increased 1.2%. But May's comps increased 7.1% as new merchandising and sales initiatives started significantly improved product margins.
Cohen said comp sales for the first 3 1/2 weeks of June have run up about 10% in the Finish Line stores and are up high-single-digits for Man Alive.  Additionally, product margins are exceeding last year and plan.

 
Looking ahead, Cohen said they are positioned to take advantage of strength in performance athletic products as a result of the summer Olympics.  Early sales of the exclusive Shox Remix 3 have been encouraging and the exclusive Air Max 180 Rebellion is expected to do well  for BTS. Technical, led by Asics and Brooks, is also expected to continue to be strong.


On a comparable per square foot basis, consolidated inventories decreased 8%.  Inventories were down 7% at the Finish Line banner and 21% at Man Alive.