The Finish Line, Inc. seems to be putting the ugliness of its failed Genesco merger bid behind it and outlined steps it is taking to move its business forward this year. The retailer may have dodged a bit of a bullet in escaping the Genesco deal as it continues to watch the fashion athletic footwear business and headwear business — both centerpieces of the Genesco deal — slow in favor of re-energized growth in the performance footwear and apparel business that has been the Finish Line strength for the last 25 years. Two new formats are on the horizon as the company focuses on a smaller mall footprint and its anticipated Nike retail collaboration.
Consolidated net sales from continuing operations fell 10.5% to $382.8 million in the fourth quarter ended March 1 from $425.7 million in the prior-year period. The prior-year quarter included an extra week that contributed approximately $24.2 million of sales. Consolidated comparable store net sales declined 6.0%. Finish Line comp store sales declined 5.4% and Man Alive comps decreased 14.2%. Direct-to-consumer sales posted double-digit growth for Q4 and the full year. The Finish Line stores saw footwear comps decline 2.1% and softgoods comps fall 18.1% for the period. Women's footwear sales comped up over 3%, while the men's business comped down approximately 1% and kids decreased 9% for Q4. (see SEW_0810)
In the running category, men's comp sales increased in low-single-digits and women's improved in the mid-single-digits, despite “declines in classic running styles.” Running ASPs increased in the low-single-digits, led by continued sales of higher priced premium footwear such as Shox+ enabled Nike products, the Bowerman series, Brooks and Asics. Technical running was said to be up “significantly.” Basketball sales were up low-single-digits, led by Brand Jordan and other premium footwear with an increase in both margin and ASP.
In sport style footwear, the men's business comped down in the low-teens, while women's sports style increased in mid-single-digits. Management said the classic portion of this business “also continued to be soft,” but Nike Air Force 1s reportedly “remained strong.”
Soft goods sales remained “a big challenge area” during the quarter, according to FINL management. They attributed the weak results in the softgoods business to a difficult year-ago comp in footwear as well as to a soft NFL license business, “especially around the participating teams in the Super Bowl.” They said headwear “did not perform well” and the NFL was disappointing. However, the mens and women's licensed fleece business was apparently up in double-digits as they continue to grow the Under Armour business.
FINL posted a net loss from continuing operations of $38.6 million, or 82 cents a share, for the quarter, compared to net income from continuing operations of $25.8 million, or 54 cents per share, for the fourteen-week quarter for the prior year. FINL estimates that the prior-year quarter saw a benefit of 8 cents per diluted share from the additional week. The most recent Q4 includes a pre-tax charge of $81.5 million, or $1.20 per diluted share, for costs related to litigation and settlement associated with the failed Genesco merger and also includes a pre-tax charge of $5.7 million, or 7 cents per diluted share, associated with the closure of 26 stores, while the prior-year quarter included charges of $3.6 million, or 5 cents per diluted share.
Looking ahead, company Chairman and CEO Alan Cohen said that the retailer will work to create more differentiation in the mall by focusing on premium products.
The focus on running is a natural and they are betting on the new Shox Air product, but they are also rolling out more preppy product. Lacoste is now in 600 doors and they are rolling in boat shoe looks from Sperry, Top-Sider, Timberland and Nike. They are also looking to Pastry, Mark Ecko, Paby Phat, Sperry and Ed Hardy to drive the fashion business.
Mr. Cohen said that Finish Line had 20% less apparel in stores at year-end and plans to reduce those levels further. Jordan and UA will expand doors and they have plans to expand Nikes Livestrong program. The retailer also plans to introduce Pastry, Fila and The North Face apparel into “select” stores.
The reduction in apparel inventory will be important as the retailer moves to its new “Finish Line 4.0” format, which at 3,500 sf is considerably smaller than the 5,400 sf in the stores today. They will also reduce footwear skus from 800 today to 600 in the new stores as they work to improve sales per square foot performance.
Additionally, the retailer is rolling out its new collaboration with Nike that will be called Finish Line Limited, a format being tested in Chandler, AZ that focuses in running, training and sports style product for “young athletes who run or use running to train for other sports.” The grand opening is in May.
>>> A focus on differentiation is key for survival in the mall. The new brand focus clearly elevates Finish Lines fashion position while they continue to balance with performance
