Finish Line a Penny Ahead

The Finish Line Inc. (FINL - Snapshot Report) posted adjusted earnings per share of 80 cents in the fourth quarter of fiscal 2012, beating the Zacks Consensus Estimate by a penny. The quarterly earnings bettered the year-ago results by 17 cents. In full-fiscal 2012, earnings per share were $1.59 versus $1.26 per share in 2011.

Indianapolis based Finish Line reported year-over-year net sales growth of 18.6% in the quarter to $456.3 million backed by strong comparable sales (comps). Comps increased 11%, with store comps growing 7% and digital comps climbing 38%. In full-fiscal 2012, revenue increased 11.4% year over year to $1,369.3 million.

The 53rd week of fiscal 2012 infused an additional $30.5 million to the fourth quarter net sales and 7 cents to the earnings per share.

By category, footwear comps were up 11.1% while soft good’s comps rose 9.4%. Footwear witnessed average selling price rise of 3.0% in the fourth quarter.

During the quarter, Finish Line’s gross profit increased 22.6% year over year to $169.5 million. Gross margin expanded100 basis points year over year to 37.2%.

Financials

At quarter end, Finish Line had cash and cash equivalents of $307.5 million, compared with $299.3 million in the year-ago period. The company had no interest-bearing debt.

Finish Line bought back 300,000 million shares in the fourth quarter, totaling $5.9 million. The company has now 3.8 million shares left over on its authorization of 5 million shares.

Store Update

Finish Line did not open any store during the quarter but closed 11. The company ended the year with 637 units.

Outlook

This premium retailer of athletic shoes, apparel and accessories is in a strong product cycle for athletic footwear. The uptrend comps will continue to bode well for the company. Finish Line‘s March comps increased 10.0% on top of an 8.0% increase for the same period a year ago. The trend calls for a strong first quarter ahead in which the company expects comps to be up in the mid-single digit range.

However, management embarked on a set of initiatives to spur technology, stores and digital capabilities and consequently invested substantially. This will lead to increased SG&A expenses resulting in constrained operating margins in 2013. The company expects first quarter earnings per share to be down approximately 30%. However, management expects earnings to pick up beginning fiscal 2014, as the investments begin to reap returns.

Finish Line, which competes with Genesco Inc. (GCO - Snapshot Report) currently, retains a Zacks #1 Rank (short-term Buy rating). For the long term, we reiterate our Neutral recommendation on the stock.