The Finish Line, Inc. continues to see its Man Alive urban nameplate as a drag on the business even as its namesake Finish Line stores posted pretty solid results in the companys fiscal fourth quarter ended February 28. Consolidated net sales decreased 4.9% to $364.1 million in the fourth quarter from $382.8 million in the year-ago period. Consolidated comp store sales declined 3.9%, as Finish Line comps declined 2.3% and Man Alive comp sales decreased 25%.
Finish Line stores saw an 11% comp sales increase in February, nearly offsetting a 6.2% comp decrease in December and a 10.2% decrease in January. For the quarter, comp store footwear sales increased 1.4%, with men's up low-single-digits, kids up mid-single-digits and women's down low-single-digits. ASPs were up 1.1% for the quarter. Management said the best performing brands included Brand Jordan, Nike, Puma, Asics, Under Armour, Converse and Pastry.
In the running category, men's was down mid-single-digits but women's was up low-singles, led by good performances from Asics, Brooks and Mizuno. Management said they were “cautiously optimistic about men's and women's running in Q1, with strong performance from Shox, a better inventory position with Puma and new introductions from Nike including the Air Max 2009 and new colors from Under Armour.”
Basketball was up mid-single-digits for the quarter, with ASPs continuing to trend up. Brand Jordan and Nike Lebron apparently “led the way” in the category. For the quarter, the kids business was up mid-single-digits, benefiting from “higher average retail prices and better turns.” Kids' was driven by the Jordan and Nike sportswear styles like Dunks and Blazers as well as the Pastry and Puma brands, which should “continue to lead the way in kids” for Q4.
In sports style, men's was down mid-singles and women's was flat, with continued traction in Nike, Pastry, Lacoste, Converse, Ed Hardy and Puma. Management said high tops remain an important part of the mix for both men's and women's and they expect vulcanized product to increase in importance as weather warms.
Finish Line saw footwear comps up about 3% for the full year, with men's, women's and kids' each up low-single-digits. ASPs were up 5.7% for the year.
Finish Line soft goods comps decreased 18.9% for Q4, but management said the format achieved better turns “as demonstrated by the reduction of inventory of approximately 40% at the end of the quarter.” They said progress is leading to improved gross margin percentage, which “continues to trend up and was up significantly in the quarter.” Seasonal products including fleece, outerwear from Jordan, Under Armour and The North Face were bright spots along with the Nike Live Strong products. Licensed continued to be weak. Management said they will also “continue to reduce licensed inventory, as well as the number of doors carrying women's apparel versus last year.”
There was little to cheer about at Man Alive for the quarter as December comps decreased 15.8%, January comps decreased 36.7% and February decreased 29.7% versus the prior year.
FINL reported a loss from continuing operations of $1.2 million, or 3 cents a share, in the fourth quarter, compared to a loss from continuing operations of $39.0 million, or 83 cents, the prior year. The fourth quarter consolidated results include $32.6 million of pre-tax non-cash impairment charges as well as pre-tax income of $2.1 million related to the final resolution of transaction expenses associated with the terminated merger with Genesco, Inc.
Excluding the charges, income from continuing operations was $19.6 million, or 36 cents per diluted share, compared to $21.3 million, or 45 cents per diluted share, in the year-ago quarter.
Gross margins decreased 50 basis points to 31.7% of sales in Q4, consisting of a 70 basis point decrease in product margins and a 10 basis point increase in occupancy costs, partially offset by a 30 basis point improvement in shrinkage. Management said the decrease in product margins was primarily due to deep markdowns at Man Alive and tough year-over-year margin comparisons at Finish Line.
FINL sees opening eight to 12 new Finish Line stores and remodeling five to 10 others this year. They plan to close 10 to 15 Finish Line stores. Management said the exact number of closures will depend upon lease renegotiations. They do not plan to open any Man Alive stores, but plan to remodel three to four stores as they transition the concept and inventories to the new Decibal format (SEW_0907), which will feature more “denim, more fashion denim, more skater looks, more rocker looks,” which management said is “trend-right for the street fashion business today.” FINL is testing three Decibal stores, one each in Pittsburgh, Dallas and Tallahassee. Another yet to be designated location may open later.
Finish Line store inventories decreased 8% on a per square foot basis and Man Alive decreased 16% on the same basis.
March comps were running down about 3.7% for the first few weeks, but management said this was ahead of plan due to the shift in Easter.
