Christmas came early for The Finish Line as the athletic specialty retailer swung to a surprise fiscal third quarter profit — thanks to a tax benefit as well as improved margins — and moved into positive territory for comparable store sales for the three-month period ended November 28 on strength in apparel and a small footwear gain. Wall Street nodded in approval,sending FINL shares up 11.9% for the holiday-shortened week to close at $11.02 Thursday. The energy reported by the retailer may also be the catalyst that helped drive up other stocks in its peer group for the week.
The Finish Line reported that fiscal Q3 net income reached $6.6 million, or 12 cents per diluted share, compared with a year-earlier loss of $8.8 million, or 16 cents per diluted share. The latest results include a $6.5 million onetime tax benefit, while the prior year's results included expenses tied to the terminated merger with Genesco Inc. Excluding the tax benefit, income from continued operations improved 25% to $13.5 million.
A 1.7% comp store sales gain compared to a 3.3% comp decline in the year-ago period. The retailer reported that the conversion rate was up 1.6% and average tickets increased almost 4% for the quarter, offsetting a midsingle
digit traffic decline. By month, comps were up 5.4% in September, declined 4.4% in October and gained 2.5% in November.
On a category basis, footwear comps were up 1% for the quarter with a monthly trend line that mirrored the total Finish Line trend — up 4.5% in September, down 6.9% in October, and up 3.7% in November. Soft goods comps increased 5% for the quarter.
The footwear comp was helped by particular strength in women's and kids. Footwear ASPs improved 4.8% with the help of strong sell-through at regular price on new performance-based products.
On a conference call with analysts, company President and COO Steve Schneider said running footwear comps were up in the mid teens with both men's and women's posting solid comp growth. Men's running was led by Nike with strength in lightweight running as well as Air Max 2009, Skyline,
and Shox 09.
Strong results were also seen with Puma's Jago. Women's running were led by Nike Air Max 2009 as well as Puma's Jago and Volt.
While Finish Line saw strength in Retro Jordan, basketball footwear comps were down slightly and the company expects to see continued sales pressure in the category against hot launches a year ago.
Toning continues to be a strong category in women's footwear, with “exceptional” performances by both Reebok Easy Tone and Skechers Shape-Ups models.
Speaking to Sports Executive Weekly, Sam Sato, EVP and chief merchandising officer, said the company benefited from taking an aggressive inventory position in toning coming into the quarter. Said Sato, “We're excited about that category and we remain bullish there.
Finish Line also carries a toning line from GH Bass and plans to add a couple of other toning brands in its fourth fiscal quarter. Within athletic casual footwear, the overall comp trend was down for the quarter. Men's performed slightly better than women's due to momentum
in the vulcanized trend and a strong performance from Polo,
a new brand for Finish Line.
In kids footwear, comps were up 3.6% with a strong running business led by Brand Jordan, Puma and Under Armour. The character business was also solid, lead by items within its exclusive novelty program.
Softgoods saw its first positive comp in 15 quarters with product margins ahead 300 basis points.
Sato told SEW that apparel benefited from ongoing efforts to right-size its business relative to its inventory along with a focus on “best in class brands” such as Under Armour, Jordan and The North Face. “The goal has been to really create a product offering that resonates
with our target customers and this past quarter we really saw the results of all that hard work,” said Sato.
Softgoods will represent about 15% of Finish Line's sales this year on an annual basis.
Accessories also had a comp increase driven by socks and shoe care.
E-commerce sales were up 11% and are up 8.6% year-to-date with improved profitability. Toning and fleece both saw “exceptional online sales” prior to their widespread availability in its stores. Sales in its “We've Got It” in-store pickup program are up 50% year-to-date.
Sales from catalog and direct mail increased 67% in Q3 while its Winner's Circle customer loyalty program saw a 30% increase in sign-ups for the quarter.
Gross margins improved 250 basis points. Product margins were up 200 basis points due to the sale of more full priced, premium products and effective management of inventory levels to increase turns.
“What we certainly found this past quarter is new products being delivered today that are evolutionary in design and technology are selling well and we continue to see good sell-throughs at regular price and obviously regular price means higher margins,” said Sato.
Occupancy margins rose by 50 basis points related to “ongoing efforts to work with landlords on renegotiating leases.” Occupancy expenses on an absolute dollar basis declined 3.1% in the third quarter. SG&A expenses decreased 210 basis points due to cost controls.
Merchandise inventories were down 11% on a per square foot basis compared to last year. Inventory turn and inventory
aging levels also improved.
Looking at the early fourth quarter and Holiday season read, comps on a month-to-date basis for the period through Dec. 20 increased 4.9% compared to a 22.1%
decline for the same period one year ago. On the conference call, CEO Glen Lyons said comps for the remainder of year become “much more difficult,” That includes a year-ago 8% increase in comps for the rest of the fourth quarter, including a very positive 11% comp in the month of February last year.
“Sales are still expected to be choppy throughout the fourth quarter, and therefore we will maintain our cautious consumer view,” said Lyons. “In this environment
we believe the best course of action is to stay with our current strategy — maintaining our premium position, maintaining disciplined cost controls, and maintaining
improvement in inventory productivity.”
The Finish Line Sparks Energy in Market
Christmas came early for The Finish Line as the athletic specialty retailer swung to a surprise fiscal third quarter profit — thanks to a tax benefit as well as improved margins — and moved into positive territory for comparable store sales for the three-month period ended November 28 on strength in apparel and a small footwear gain. Wall Street nodded in approval,sending FINL shares up 11.9% for the holiday-shortened week to close at $11.02 Thursday. The energy reported by the retailer may also be the catalyst that helped drive up other stocks in its peer group for the week.
The Finish Line reported that fiscal Q3 net income reached $6.6 million, or 12 cents per diluted share, compared with a year-earlier loss of $8.8 million, or 16 cents per diluted share. The latest results include a $6.5 million onetime tax benefit, while the prior year's results included expenses tied to the terminated merger with Genesco Inc. Excluding the tax benefit, income from continued operations improved 25% to $13.5 million.
A 1.7% comp store sales gain compared to a 3.3% comp decline in the year-ago period. The retailer reported that the conversion rate was up 1.6% and average tickets increased almost 4% for the quarter, offsetting a midsingle digit traffic decline. By month, comps were up 5.4% in September, declined 4.4% in October and gained 2.5% in November.
On a category basis, footwear comps were up 1% for the quarter with a monthly trend line that mirrored the total Finish Line trend — up 4.5% in September, down 6.9% in October, and up 3.7% in November. Soft goods comps increased 5% for the quarter.
The footwear comp was helped by particular strength in women's and kids. Footwear ASPs improved 4.8% with the help of strong sell-through at regular price on new performance-based products.
On a conference call with analysts, company President and COO Steve Schneider said running footwear comps were up in the mid teens with both men's and women's posting solid comp growth. Men's running was led by Nike with strength in lightweight running as well as Air Max 2009, Skyline, and Shox 09.
Strong results were also seen with Puma's Jago. Women's running were led by Nike Air Max 2009 as well as Puma's Jago and Volt. While Finish Line saw strength in Retro Jordan, basketball footwear comps were down slightly and the company expects to see continued sales pressure in the category against hot launches a year ago.
Toning continues to be a strong category in women's footwear, with “exceptional” performances by both Reebok Easy Tone and Skechers Shape-Ups models.
Speaking to Sports Executive Weekly, Sam Sato, EVP and chief merchandising officer, said the company benefited from taking an aggressive inventory position in toning coming into the quarter. Said Sato, “We're excited about that category and we remain bullish there.
Finish Line also carries a toning line from GH Bass and plans to add a couple of other toning brands in its fourth fiscal quarter. Within athletic casual footwear, the overall comp trend was down for the quarter.
Finish Line also carries a toning line from GH Bass and plans to add a couple of other toning brands in its fourth fiscal quarter. Within athletic casual footwear, the overall comp trend was down for the quarter.
Men's performed slightly better than women's due to momentum in the vulcanized trend and a strong performance from Polo, a new brand for Finish Line.
In kids footwear, comps were up 3.6% with a strong running business led by Brand Jordan, Puma and Under Armour. The character business was also solid, lead by items within its exclusive novelty program.
Softgoods saw its first positive comp in 15 quarters with product margins ahead 300 basis points.
Softgoods saw its first positive comp in 15 quarters with product margins ahead 300 basis points.
Sato told SEW that apparel benefited from ongoing efforts to right-size its business relative to its inventory along with a focus on “best in class brands” such as Under Armour, Jordan and The North Face. “The goal has been to really create a product offering that resonates with our target customers and this past quarter we really saw the results of all that hard work,” said Sato.
Softgoods will represent about 15% of Finish Line's sales this year on an annual basis.
Accessories also had a comp increase driven by socks and shoe care.
E-commerce sales were up 11% and are up 8.6% year-to-date with improved profitability. Toning and fleece both saw “exceptional online sales” prior to their widespread availability in its stores. Sales in its “We've Got It” in-store pickup program are up 50% year-to-date. Sales from catalog and direct mail increased 67% in Q3 while its Winner's Circle customer loyalty program saw a 30% increase in sign-ups for the quarter.
E-commerce sales were up 11% and are up 8.6% year-to-date with improved profitability. Toning and fleece both saw “exceptional online sales” prior to their widespread availability in its stores. Sales in its “We've Got It” in-store pickup program are up 50% year-to-date. Sales from catalog and direct mail increased 67% in Q3 while its Winner's Circle customer loyalty program saw a 30% increase in sign-ups for the quarter.
Gross margins improved 250 basis points. Product margins were up 200 basis points due to the sale of more full priced, premium products and effective management of inventory levels to increase turns.
“What we certainly found this past quarter is new products being delivered today that are evolutionary in design and technology are selling well and we continue to see good sell-throughs at regular price and obviously regular price means higher margins,” said Sato.
Occupancy margins rose by 50 basis points related to “ongoing efforts to work with landlords on renegotiating leases.” Occupancy expenses on an absolute dollar basis declined 3.1% in the third quarter. SG&A expenses decreased 210 basis points due to cost controls. Merchandise inventories were down 11% on a per square foot basis compared to last year. Inventory turn and inventory aging levels also improved.
Looking at the early fourth quarter and Holiday season read, comps on a month-to-date basis for the period through Dec. 20 increased 4.9% compared to a 22.1% decline for the same period one year ago. On the conference call, CEO Glen Lyons said comps for the remainder of year become “much more difficult,” That includes a year-ago 8% increase in comps for the rest of the fourth quarter, including a very positive 11% comp in the month of February last year.
“Sales are still expected to be choppy throughout the fourth quarter, and therefore we will maintain our cautious consumer view,” said Lyons. “In this environment we believe the best course of action is to stay with our current strategy — maintaining our premium position, maintaining disciplined cost controls, and maintaining improvement in inventory productivity.”
