BEHIND THE NEWS: After bout of indigestion, Galyan’s buyer on the rebound

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Just in time for Christmas, Dick’s Sporting Goods Inc. finally has its arms around its biggest acquisition ever, last year’s $305 million purchase of Galyan’s Trading Co., the 48-store chain that was based in Plainfield.

Pittsburgh-based Dick’s rattled investors in August, reporting Galyan’s stores had posted disappointing sales after adopting the Dick’s moniker and store merchandise.

In a single day of trading, Dick’s shares plunged $6.33, or 16 percent, to close at $32.90. In the ensuing weeks, investors continued to shed the stock, knocking it as low as $26.95 in mid-October.

Analysts theorized the company had underspent on print advertising to support the converted stores. Or perhaps stores in markets where Dick’s and Galyan’s had competed, such as Indianapolis, were cannibalizing sales from one another.

But now shares are on the upswing. On Nov. 15, Dick’s reported profit of $4.2 million, or 8 cents a share, two pennies better than many analysts had projected. The stock that day jumped 10 percent, to $33.75. It was trading Nov. 22 at $34.70.

Why the turnaround?

“When sales go up, it’s difficult to determine … which effort gets credit,” Dick’s Chief Financial Officer Michael Hines said in a conference call with analysts. However, he added, “Once we synchronized the advertising to be consistent with what we have done in the past, we saw the results we expected to see.”

In the weeks since, analysts have issued a wave of upgrades. Among the most bullish is Merrill Lynch’s Michael Keara, who says in a report the stock might rise to $48.

Other analysts urge caution, however. The company, which now operates 255 stores, paid so much for Galyan’s that it might struggle to get an attractive return on its investment, Piper Jaffray analyst Mitchell Kaiser Sr. said in a report.

“We continue to view [Dick’s] as the premium operator in the sporting goods retail sector,” he said. “However, we believe the shares are fully valued, with our continued concern with the Galyan’s acquisition.”

A candid look at Clay Terrace

Clay Terrace-the much-ballyhooed lifestyle center in Carmel-is performing well but not spectacularly.

That’s according to Simon Property Group CEO David Simon. In a recent conference call with analysts, he said smaller lifestyle centers without a department store anchor, such as Clay Terrace, “are not the sales juggernauts that you would be led to believe.”

The $100 million, 489,000-square-foot center, which Simon developed with Carmel-based Lauth Property Group, opened a year ago. It features a Dick’s, Wild Oats and Circuit City, as well as dozens of smaller tenants.

At lifestyle centers without a department store, “sales are not-I mean Clay Terrace is a great example. It’s gotten the returns we wanted. It’s a successful project,” Simon said. “But those tenants that [also] exist in Keystone and Castleton … at Clay Terrace, they don’t do the same level of business.”

Refining operations at Finish Line

Big retail chains are successful because they figure out what works, then roll out stores across the country, with each location featuring a similar look and hawking nearly identical merchandise.

The formula has worked wonders for Finish Line Inc., the 23-year-old Indianapolis-based chain that now has more than 600 stores and annual sales topping $1 billion.

But now Finish Line executives are ready for the next challenge-varying merchandise by store to reflect the sometimes-subtle demographic differences in customer preferences.

“We believe that our strategy to segment our stores by five consumer types is going to improve our inventory productivity and make each of our stores more responsive and relevant to its specific consumer needs,” Finish Line CEO Alan Cohen said in a conference call with analysts this fall.

Finish Line Chief Financial Officer Kevin Wampler said the transition will take a while because the company orders products six to nine months in advance. He said the effort, which began this spring, should be nearly finished by late spring of 2006.

Adding sizzle at Steak n Shake

The Steak n Shake Co., which has used a stream of new shake offerings to boost sales the past two years, now is ready to roll out its first innovation in years on the burger front.

Buoyed by the positive results of test marketing in Nashville, Tenn., the Indianapolis-based company in late December will introduce three “premium-topping steakburgers”-three cheese, hickory double cheese, and mushroom and onion. The sandwiches will be served on what company officials describe as a “high-end bakery bun.”

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