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Finish Line Delivers Mixed 1Q

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The Finish Line Inc. (FINL - Free Report) posted adjusted earnings per share of 24 cents in the first quarter of fiscal 2013, beating the Zacks Consensus Estimate by a penny. However, the quarterly earnings per share were 6 cents below the year-ago results.

Indianapolis based Finish Line reported year-over-year net sales growth of 6.5% in the quarter to $319.0 million backed by strong comparable sales (comps). However, the sales figure slightly fell short of the Zacks Consensus Estimate of $321.0 million. Comps increased 8%, with store comps growing 6% and digital comps climbing 28%.

By category, footwear comps, which accounted for 89% of the first-quarter mix, were up 8.5%. In the footwear category, running comps increased at low double digits. Average selling price at Footwear increased 5.5%. Soft good’s comps increased 4.6%. The company’s decision to leave the private label business marred soft goods sales to some extent. 

During the quarter, Finish Line’s gross profit nudged up 1.4% year over year to $104.7 million. Gross margin shrunk 150 basis points year over year to 33.0%.


At quarter end, Finish Line had cash and cash equivalents of $262.0 million, compared with $307.5 million in the year-ago period. The company had no interest-bearing debt.

Finish Line bought back 1.5 million shares in the first quarter for $32.4 million. The company has now 2.3 million shares left in its authorization of 5 million shares.

Store Update

Finish Line opened 9 stores during the quarter and closed 6. In addition, the company relocated or refurbished 7 stores and ended the quarter with 640 units.


Finish Line expects its earnings per share to grow 6–7% year over year in fiscal 2013. The guidance takes an annual comparable store sales growth of 5–6% into account.


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

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 and constrained operating margins in 2013. However, management set itself a target to achieve $2 billion in sales and $2.50 in earnings per share by fiscal 2016.

Finish Line, which competes with Genesco Inc. (GCO - Free Report) , currently, retains a Zacks #2 Rank (short-term Buy rating). For the long term, we reiterate our Neutral recommendation on the stock.

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