Finish Line’s Q2 Profits Climb 24 Percent

Earnings grew 24.4 percent to $20.9 million, or 39 cents per share, compared to $16.8 million, or 31 cents, a year ago. Operating margin increased 130 basis points to 10.2 percent of sales this year from 8.9 percent of sales a year ago.

Merchandise inventories increased 5.9 percent to $229.8 million at the end of the quarter compared to $217.0 million a year ago.

At quarter-end, the company had no interest-bearing debt and $289.6 million in cash and cash equivalents, up from $253.7 million at the end of the second quarter a year ago. The company repurchased 2.1 million shares of its outstanding common stock in the second quarter, totaling $44.8 million. On a year-to-date basis, 2.6 million shares have been repurchased, totaling $54.5 million. Finish Line has 4.1 million shares remaining on the 5-million-share repurchase program currently in place.

Year-to-Date Results

For the 26 weeks ended August 27, 2011, net sales increased 8.1 percent to $631.0 million compared to $583.5 million for the same period a year ago. Year-to-date comparable store sales increased 8.8 percent on top of a 6.1 percent increase last year.

Finish Line reported net income of $37.3 million, or $0.69 per diluted share, which is 23.2 percent higher than the same period a year ago, when net income was $30.5 million, or $0.56 per diluted share.

September Sales Update

Comparable store sales on a month-to-date basis for the period of August 28 through September 19 increased 9.0 percent on top of a 6.2 percent increase for the same period a year ago.

Acquisition

As announced September 1, Finish Line acquired the assets of an 18-store chain of specialty running shops for $8.5 million and assumed certain liabilities. Management noted that the acquisition is expected to be the foundation of future growth within the specialty running business through bricks-and-mortar and digital expansion of the acquired business as well as other potential acquisitions within the specialty running segment.

“Finish Line is effectively executing all three of our strategic priorities to drive long-term shareholder value, including growing our core business, expanding outside of our existing business and delivering direct returns to shareholders,” said Chairman and Chief Executive Officer Glenn Lyon. “In Q2, we increased comp store sales and earnings within the core business for the eighth consecutive quarter and repurchased 2.1 million shares of company stock to drive shareholder returns. Our recent acquisition within specialty running represents the first step in our strategy to expand outside of our existing business. We believe the long-range opportunities for growth in specialty running are substantial and we are pleased to start out with the best-in-class player as our foundation for that growth. Our company is evolving into a sustainable growth story and we are confident in our ability to continue to perform and execute the strategic plan that is driving our success.”