The Finish Line pointed to an increasingly competitive and promotional environment in the mall, as well as “limited introductions and wider distribution of new and compelling performance products,” for a flat footwear business in the second quarter. But the retailer also took a big hit in the apparel business for the period as the decline in the licensed jersey business led to a 30% decrease in average selling prices in apparel.

FINL is apparently starting to feel the effects of broader distribution of Nike marquee product at Foot Locker, Champs, and Footaction. They may also be feeling some impact of the family footwear guys picking up some of the running business.

The pinch is starting to cause a de-leveraging of costs and most likely saw some pressure on margins, causing the retailer to lower guidance for the second quarter and the balance of the year. SG&A was also negatively affected by a reserve of $1.5 million, or two cents per share after taxes, related to legal matters regarding “alleged civil violations of California wage and hour laws.”

FINL said second quarter EPS is now seen in the 37 cents to 39 cents per diluted share range, down about 11 cents from previous guidance, and down roughly 8% to 12% from last year’s 42 cents per diluted share delivered in the period.

FINL now sees flat comps for the year, resulting in sales of $1.3 billion and diluted EPS in the $1.16 to $1.21 per share range. The retailer expects to post a loss of a penny to 3 cents per diluted share in Q3 on flat comps.

Second quarter net sales increased about 9.4% to $341.6 million from $312.2 million in the year-ago period, due in part to the inclusion of the Man Alive stores that were acquired in late January. Comp store sales were down 2% versus a 6% gain in Q2 last year. Internet sales grew more than 30% for the quarter.

Footwear comps were flat for the quarter versus an 8% increase in Q2 last year. The kid’s footwear segment was up in double-digits, while the men’s business comped down in low-single-digits and the women’s business declined in mid-singles. The men’s running business was still showing strength, as was the men’s casual business. The gains here were offset by “significant weakness” in men’s basketball and “women’s footwear in general.”

Average selling prices per pair declined 1% for the period, the first decline in six quarters.

Management said they have significantly expanded their Puma presentation for back-to-school. They called out adidas as a key performer in both running and athletic and also cited growth with Asics, New Balance, and Converse. Brand Jordan also continues to perform, despite the overall weakness in basketball. Nike LE also sold through well.

The apparel/accessories business fell 8% on a comp basis in Q2 on top of a 1% decline in the same period last year. Management said they sold more units versus last year, but lower ASP’s led to the sales decline. They are still seeing growth in their private label biz.

Inventories are still seen as clean and “in line” and are expected to see an increase of 1% to 3% per square foot at the end of the period.


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The Finish Line Fiscal Second Quarter
Comparable Store Sales Results
Category JUN JUL AUG QTR
Footwear -1% flat flat flat
Apparel/Access. -9% -6% -10% -8%
Total -3% -1% -2% -2%