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The Finish Line Inc. (FINL - Snapshot Report) posted adjusted earnings per share of 11 cents in the third quarter of fiscal 2012, in line with the Zacks Consensus Estimate. However, the quarterly earnings exceeded the year-ago results by 8 cents.

Indianapolis based Finish Line reported year-over-year net sales growth of 8.1% in the quarter to $282.0 million backed by strong comparable sales (comps). In the first nine months of the fiscal year, comps increased 7.0% as opposed to a 4.5% rise recorded in the prior-year quarter. By category, footwear comps were up 7.4%.  Men's and women's running, basketball and the kid's business contributed to the footwear comps.

Men's footwear, the largest segment, was up more than 7% in comps sales while women's running posted low single-digit comps. Toning sales was a dampener in the quarter.

During the quarter, Finish Line’s gross profit increased 11.1% year over year to $91.0 million. Gross margin expanded nearly 100 basis points to 32.2% driven by efficient cost containment. However, product was down 20%.

Financials

At quarter end, Finish Line had cash and cash equivalents of $216.6 million, compared with $222.0 million in the year-ago period. The company had no interest-bearing debt.

Finish Line bought back 2.6 million shares in the first nine months of the year for $54.5 million. The company currently has 4.1 million shares remaining on the ongoing 5 million share repurchase program.

Store Update

Finish Line opened four stores and closed three during the quarter. For the remainder of this fiscal year, the company does not expect to open any new store. Finish Line may close up to an additional 10 stores.

Our Take

This premium retailer of athletic shoes, apparel and accessories is in a strong product cycle for athletic footwear. The uptrend in basketball category and other footwear will continue to bode well for the company.

Looking ahead at the fourth quarter, management anticipates strong running trends for both for men and women to continue.

However, the toning segment has been underperforming for quite some time. Management expects the negative impact from toning to end in the fourth quarter.

Finish Line currently retains a Zacks #2 Rank (short-term Buy rating). For the long term, we reiterate our Neutral recommendation on the stock. However, one of Finish Line’s peers, Genesco Inc. (GCO - Snapshot Report) retains the Zacks #1 Rank (short-term Strong Buy rating).

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