The toning trend in athletic shoes apparently has run its course.
Sales of the oddly shaped shoes fell more than 45 percent in the fourth quarter for The Finish Line Inc., and the Indianapolis-based athletic footwear and apparel retailer is making big markdowns on its remaining inventory.
But the falling popularity of the shoes hasn't tripped up Finish Line. A booming business in basketball and running shoes, and improving fortunes in children's footwear helped the company report a fourth-quarter profit increase of 12 percent and same-store sales improvement of 4 percent.
The company's shares added more than 5 percent, to $19.46, in early trading Friday, just shy of a 52-week high.
Moving quickly to stay up on trends is familiar territory for Finish Line. Chairman and CEO Glenn Lyon told Wall Street analysts in an earnings conference call Friday that the company acts aggressively to manage its inventory and eliminate out-of-date gear.
Discounting on remaining toning shoes hurt the company's margins in the fourth quarter and could also squeeze margins in the first quarter, but a strong lineup of new products should help offset the weakness, he said. Classic and retro shoes are making another comeback.
The fall of toning shoes—pitched by the likes of Hall of Fame quarterback Joe Montana as a quick way to exercise the legs and buttocks just by walking—isn't the first time a fad fizzled. Finish Line certainly took advantage of the trend.
Lyon noted that three years ago, Nike Shox running shoes represented about 50 percent of Finish Line's business.
"I don't know what's going to soften up next," he said. "But we'll be diligent about it, move through it and move on to what the customer wants."
Finish Line, which operates 663 stores in malls across the United States, reported net income of $34.3 million, or 63 cents per share, in the quarter ended Feb. 26, compared with $30.6 million, or 55 cents per share, during the samer period a year earlier. Excluding a charge for writing down the value of stores, Finish Line said it would have earned 65 cents per share.
Revenue in the quarter rose 2.7 percent, to $384.6 million, from $374.5 million a year earlier.
Analysts expected earnings of 65 cents per share on revenue of $376.7 million.
Revenue at stores open at least a year, a key indicator for retailers, rose 4 percent, slowing from a 10-percent jump a year earlier. For the first three weeks of the current quarter, Feb. 27 through March 20, the figure rose 10.1 percent, compared with a 15.4-percent increase a year earlier, the company said.
The company said operating margins were 9 percent, near its goal of double-digit margins for the full year. For the full fiscal year, the company earned $68.8 million on sales of $1.23 billion, compared with $35.7 million on sales of $1.17 billion the previous year.