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Finish Line hits snag in new running segment

March 28, 2013
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Surprising weakness in the running segment, where The Finish Line Inc. has invested heavily, dragged down fiscal fourth-quarter profit, the Indianapolis-based athletic shoe and apparel retailer reported Thursday.

But CEO Glenn Lyon told analysts in a conference call that Finish Line isn’t giving up.

“We came to the prom with running, and I’m going to [leave] the prom with running,” Lyon said.

Lyon told the analysts that while the results were in line with company expectations, the second half of the year was particularly tough.

“We are working relentlessly on this running business,” he said. “This is our issue, and we’re going to work our way through it.”

Finish Line earlier this year said consumer sentiment had swung toward basketball products.

Finish Line’s Running Specialty Group, which operates The Running Company chain and its 27 stores, lost $550,000 in the quarter on revenue of $7.8 million.

Finish Line remains bullish on its running business, however, forecasting $45 million to $55 million in revenue in fiscal 2014 with the planned opening of 30 locations.

Finish Line earned $34.3 million, or 69 cents per share, in the quarter ended March 2. That was down 18 percent from $41.9 million, or 80 cents per share, a year earlier.

For the full fiscal year, Finish Line earned $71.5 million, a 16-percent decline from $84.8 million, due in part to falling gross margins. Earnings per share dropped from $1.59 to $1.40. Revenue rose 5 percent to $1.4 billion.

Finish Line in March 2012 announced a partnership in which it had attracted $10 million from Denver-based private equity firm Gart Capital Partners to attempt to build a dominant position in specialty running. Its new offerings include a website named Run.com.

Overall Finish Line digital sales have rebounded since the company launched and then quickly abandoned a website shortly before the 2012 holidays.

The disastrous launch cost the company $3 million in sales. In February, Chief Digital Officer and Executive Vice President Christopher Ladd resigned. Lyon said in the conference call that the company is still searching for Ladd’s replacement.

Lyon’s optimism also is driven by Finish Line’s agreement with Macy’s to become the exclusive athletic footwear partner of the national department store chain. Terms announced in September call for Finish Line to open shops in more than 450 Macy’s stores.

“This is probably the most exciting thing Finish Line has done in 30 years,” Lyon said. “We are going to have an unbelievable run with this business.”

Overall, company revenue in the fourth quarter fell 3 percent, to $442.7 million.

Same-store sales, which exclude sales at stores open less than a year, increased less than 1 percent. Digital sales, included in the same-store calculation, jumped 21 percent.

Finish Line shares were up 6 percent, to $19.40 each, in mid-morning trading Thursday.

The company operates 655 stores in malls across the United States, and plans to open 25 in fiscal 2014 and close 10 to 15.

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