The Finish Line mitigated any concerns over their Q3 earnings shortfall against analysts’ estimates as management painted a rosier picture for the fourth quarter and the year, raising guidance for Q4 on a strong start in December. While the Q3 earnings numbers came in a penny shy of the six cents per share expectations, an apples-to-apples review of the numbers reveals that the retailer would have seen EPS for the period actually jumped 67.8% compared to Q3 LY when excluding a one penny benefit from a tornado insurance settlement.

Total third quarter comps were up 8% on top of a 25% increase in Q3 last year. Footwear was up 11% on top of a 23% increase last year, but Apparel declined 3% versus a 30% jump in Q3 comps last year. (Look for monthly detail in SEW_0449). Internet sales, which boosted comp sales gains by 2% for the period, were up 80% in the third quarter ended November 27, 2004 on increased circulation of the Mag-a-Log.

Men’s Footwear comped up in mid-singles, driven by Running, Basketball, and Sport Casual, which includes Classics. Running comped up 20% for the period, driven by Nike Shox. FINL called out New Balance, K-Swiss, and adidas in the Sport Casual area, while a double-digit gain in the Kid’s business was attributed to take-downs of Nike Shox, Jordan, and AF1’s. Women’s reportedly continued its “success story”, posting double-digit gains for the quarter, driven by Classics and Performance.

The average selling price in Footwear was up 3% versus last year’s third quarter.

In Apparel, FINL said they were “very encouraged” by the continued increase in the Branded business and also cited “significant gains” in Private Label. Branded was up 50% for the period and Private Label more than doubled. The retailer made adjustments in its Licensed business to more of a fan-based model which they feel is working. Still, Licensed was less than 50% of Apparel sales in Q3 versus 70% last year.

For the year, Finish Line is estimating that Licensed will be about 50% of the business for the year versus 65% last year. Branded is expected to be about 30% of total Apparel sales this year versus 20% last year, and Private Label should be about 20% of the total versus 15% last year. FINL is planning Licensed down closer to 40% of the business next year, while Branded is seen growing to 35% and Private Label increasing to 25% of Apparel sales. Nike and adidas were called out as key contributors on the Branded side. They said sales of Reebok OnField product was up double-digits in November, despite the current promotional activity in the mall.

The retailer’s test of Merrell and The North Face evidently didn’t overly impress management, with chairman and CEO Alan Cohen stating that “we weren’t blown away necessarily, but we weren’t discouraged.”

Cohen said they will continue to work with both brands to try and grow the programs a “little bit next year and try to take them to another level.”

What does appear to be working is Timberland, a brand that Cohen said the “struggled with” historically. He said they “really saw a spike in sales”, especially for Holiday. He called out the Women’s product as a key performer for the Holiday season.

To kick-start fourth quarter, FINL saw a 9% comp store sales gain in December — on top of a 22% gain in the year-ago period — versus the company’s 5% growth plan for the month and 3% comp plan for the quarter.

December has historically been about 45% of Q4 sales, but FINL sees that shifting a bit based on launch product this year and the strengthening of February. The average selling price in Footwear continued to rise in December as momentum continued in all three gender groups. The Jordan 13 launch shoe liquidated between 80% to 90% on first day. The retailer also reported a “slight improvement” in Apparel comps for the month.

Internet sales increased 60% in December and Gift Card sales were up more than 25%.

Management is sticking with its plan of a 2% comp gain in both January and February. Fourth quarter sales are expected to reach $355 million, an increase of approximately 16% from Q4 last year. They increased EPS guidance to a range of 52 cents to 54 cents per diluted share on a 5% comp sales gain versus prior guidance of 50 cents to 52 cents per share on a 3% increase in same-store sales.

Full year sales for fiscal 2005 are seen breaking the billion dollar threshold, increasing nearly 18% to $1.16 billion versus $985 million last year. Full year EPS is forecast to be in the $1.20 to $1.22 per share range on an 8% increase in comp store sales.

Full year sales for fiscal 2006 are expected to reach $1.29 billion, with EPS in the range of $1.39 to $1.43 per share on a 2% comp store sales gain.