Finish Line Q2 Profit Rises on Higher Sales, Lower Costs

In Reports, What's New, Industry News by Jeff Prine

Workout gear for women at Finish Line

Workout gear for women at Finish Line

Indianapolis— The Finish Line sprinted into second quarter earnings on Friday including a profit increase of 6.1% thanks to improved sales and lowered costs. Not to mention successful openings of its in-shop concepts at Macy’s stores.

For the quarter ended August 31, the athletic apparel, footwear and accessories retailer posted a profit of $26.5 million, or 54 cents a share, compared with a profit of $25 million, or 49 cents a share, in the same quarter of 2012. That beat analysts’ average estimate for 45 cents a share.

Net revenue was up 13.3% to $436 million compared with analysts’ estimate for $426 million in sales. Comparable store sales were up 1%.

Gross profit as a percentage of sales narrowed to 33.6% from 35% a year earlier while operating income fell to 9.8% from 10.3% a year ago.

“We are pleased to have delivered a solid second quarter performance,” said Chairman/CEO Glenn Lyon. “The combination of positive comparable sales and good expense control drove a 10% increase in earnings per share over last year. At the same time, we continued to make good progress building our business with Macy’s and growing our Running Specialty Group.”

New offerings from Nike, Adidas and Asics were well received, too, Lyon said. In particular Nike’s Flyknit Lunar shoe and Flynit Free and Adidas’ Springblade, “which launched in early August is selling extremely well with a $180 pricepoint,” he noted.

Looking Ahead: Expanded Backpack Assortment

“It is clear that innovation is generating excitement in the marketplace and driving improved results in our business,” Lyon said. Sales of basketball shoes remained strong, with Nike’s Jordan Brand and Signature series helping lead the way.

Lyon told analysts on a conference call that Finish Line expects to have 180 shops open inside Macy’s in time for the holiday shopping season.

“We’re very pleased with the initial results and very excited about this strategic growth initiative,” Lyon said.

In its second half, Finish Line will emphasize licensed and branded fleece, branded apparel for children and an expanded assortment in backpacks.

As for its fiscal full year, Finish Line still expects earnings per share in the mid-single digit percent over last year’s adjusted earnings of $1.47 a share. Comparable store sales are expected to increase in the low single digits.

Analysts expect the company to have earnings of $1.57 a share.

“Looking ahead, we are cognizant of the headwinds currently facing the retail industry and this has been incorporated into our near-term planning,” Lyon said, noting “our optimism for the back half of the year is somewhat tempered by the still-challenging retail environment.”


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