The Finish Line Answers Critic with Q1 Performance…

The Finish Line left little doubt as to its current trend which appears to be onward and upward, at least in the footwear category. The mall specialty retailer saw May comp store sales jump 16%, with footwear posting a 20% increase and apparel a 2% decline for the month. Apparel was reportedly up against a May last year that had a 50% comp sales gain. One could also speculate that athletic apparel looks may start to be a challenge for the mall segment as the urban guys move more to tailored sportswear looks.

FINL saw net sales increase 24.1% to $258.0 million for first quarter ended May 29 versus net sales of $207.8 million for Q1 last year. Comparable store net sales for Q1 increased 14% on top of a 14% increase reported for the same period last year. Footwear comparable store sales increased 16% and Apparel/Accessories comparable store sales increased 5% for the quarter. The retailer started including Internet sales at the start of the new fiscal year, which added about 1.0% to the comp sales increase.

Alan Cohen, Finish Line's chairman and CEO said the key sales driver for the company is the breadth of its product assortment that has allowed them gain market share “in all footwear segments including men's, women's and kids'.”

FINL said that gross margin is expected to improve for Q1 versus last year, due primarily to “continuing strong sell-through of higher-priced performance and premium footwear, led by Nike.” Sales of those premium products was said to have led to a 5% increase in the average selling price in footwear for the quarter.

Two weeks ago, Matt Serra, chairman and CEO of chief rival Foot Locker, Inc., alluded to potential inventory problems at Finish Line. He made the statement in a conference call with analysts as a reason why FINL was running promotional sales. Finish Line inventory was up 21% at the end of their fiscal fourth quarter, a figure that now appears to be well in line with their 24% sales increase for the most recent quarter. FINL expects inventory to be up 10% to 12% on a per square foot basis at the end of the first quarter. They also said the percentage of aged inventory has “improved versus the same period a year ago.”

FINL raised guidance for the first quarter, now estimating EPS in the 41 cents to 43 cents per share range versus previous guidance in the 37 cents to 39 cents range. The increased guidance includes a two to three cent hit due to the unsuccessful bid for the Footaction stores.

Comps are expected to increase 5% for the second quarter, versus a previous forecast of approximately 3%, and total sales are now seen increasing 14.5% to $310.0 million.

FINL upped full fiscal year EPS estimates by ten cents to the $2.39 to $2.43 per share range on a 6% comp sales gain and total sales of $1.15 billion.