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Shares of Finish Line (FINL - Free Report) plummeted 30% in premarket trading on Tuesday after the company reported lower than projected preliminary second quarter sales results Monday night. Despite bouncing back a bit since then, investors seem to be running from sporting goods sector stocks due in part to Finish Line’s updated full-fiscal year outlook.

The athletic footwear company expects to report $469.4 million in second-quarter revenues, which marks a 3.3% decline from the year-ago period. The revenue dip can be attributed to a 4.6% drop-off in comparable sales.

Finish Line now projects its full-year comparable store sales will fall by 3% to 5%, instead of the low-single digit gains the company previously projected. The sports retailer cut its updated full-year earnings projections in half to hit a new range of between $0.50 a share and $0.60 a share—which would be its smallest profit since 2009.

In response to the dim outlook, Finish Line (FINL - Free Report) stock touched a new 52-week low of $6.90 a share after more than 18 million shares traded hands Tuesday morning. The company’s average volume is 1.6 million. Finish Line stock has fought its way back from its premarket depths to hover around 19% below Monday’s close.

The poor quarter and even worse guidance prompted the company’s board of directors to “unanimously adopted a shareholder rights plan (the “Rights Plan”) to protect the best interests of Finish Line shareholders.”

The move to bar any individual stockholder from owning more than 12.5% of outstanding shares was made Monday night to help avoid a possible takeover. The anti-takeover plan is set to expire in August 2020.

With a market cap of just $417 million, Finish Line isn’t a massive company. But its negative updated outlook seems to have helped confirm what many investors already knew: the sports retail and sporting goods industry could be in serious long-term trouble—especially in the footwear sector.

Sports Industry Retail

The Indianapolis, Indiana-based sports footwear retailer helped send sports-related investors running on Tuesday, as it seems the industry continues to be crossed over by the fluidity and reach of online retail.

Shares of fellow sports-focused footwear retailer Foot Locker (FL - Free Report) dipped by 1.12%, while Dick’s Sporting Good (DKS - Free Report) fell by 1.80% and now hovers just above its 52-week low. Small cap sports retailers Big 5 Sporting Goods (BGFV - Free Report) and Hibbett Sports (HIBB - Free Report) both sunk by over 2.50%.  

Big-name sportswear brands with major exposure at Finish Line also suffered. Adidas AG (ADDYY - Free Report) saw its stock price fell by 0.95%, while shares of Nike (NKE - Free Report) dropped by 2.35%.

And as is often the case during the recent industry wide investor pullback, Under Armour (UAA - Free Report) felt the brunt of the blow. Shares of the Maryland-based sportswear company tanked by over 3.60% and touched a new 52-week low.

Bottom Line

Brick-and-mortar sporting goods companies have seen their stock prices fall as e-commerce outlets, and Amazon (AMZN - Free Report) in particular, further encroach on their sales. To remain competitive going forward, Finish Line and other retailers need to consider all of their options, and the first among them might be to allocate resources to bolster their online and digital presence.

If they don’t, Nike, Adidas, and Under Armour could have little choice but to wean their way off of traditional retail dependence faster than they originally planned.

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