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Finish Line seeking buyer for its JackRabbit stores, sources say

November 2, 2016

The Finish Line Inc. is looking for a buyer for its JackRabbit chain of specialty running-shoe stores, marking a turnabout from an ambitious expansion in that category, sources familiar with the matter told Bloomberg News.

The division, which operates 70 stores under various names, could draw interest from private equity firms and other sporting-goods chains, said the sources, who asked not to be identified because the process isn’t public.

It’s been a tough year for sporting-goods merchants, with the retailers Sports Authority, Eastern Mountain Sports and Golfsmith all filing for bankruptcy, along with equipment maker Performance Sports Group. Even as it looks to offload JackRabbit, Indianapolis-based Finish Line is seeking growth elsewhere. The company launched a new web page last month specifically aimed at women.

Dianna Boyce, a spokeswoman for Finish Line, told IBJ in an email Tuesday afternoon that the company does not "comment on marketplace rumors or speculation."

Finish Line spent tens of millions of dollars to buy up small, regional running stores, starting with the purchase of an 18-store chain in 2011. The 70 stores in 17 states and the District of Columbia operate under more than a dozen names, with outposts in Broad Ripple, Carmel, Fishers and Greenwood using the Blue Mile moniker.

But the shine has come off the high-end running shoe market over the past year. Consumers have gravitated toward less technical sneakers, and there’s been declining participation rates in long-distance races, according to NPD analyst Matt Powell.

For several years, the shoemakers and retailers could count on shoes meant for marathon training morphing into a mainstay of everyday wardrobes. But that trend has been overtaken by a shift to more retro and casual sneakers. Sales of performance running shoes in the U.S. this year have declined at a mid-single-digit percentage rate, Powell said.

“Running is much more social and lighthearted now,” Powell said. “It’s: ‘I’m out with my friends and having a good time.’ If that’s how you are approaching your fitness, you probably don’t need a $150 running shoe.”

Specialty running stores are also a difficult operating model. Costs are higher than with other kinds of athletic footwear stores because salespeople need more expertise. Discounting and promotions aren’t a core part of the strategy. It’s also increasingly difficult to keep up with online competitors.

IBJ reported in July that Finish Line was projecting JackRabbit would lose money in its fiscal year that ends in February while racking up sales of $95 million to $100 million.

During an Sept. 23 earnings call with analysts, Finish Line CEO Sam Sato was asked whether the company was considering options for the JackRabbit business.

"We've put very specific milestones around sales and profitability for this business over the course of this year, and the team continues to work hard," he said. "They've done a great job of getting their inventories in shape, both from a quantity and quality perspective. That said, there's still a lot of work to do, especially around improving profitability. We remain committed to this business, but as I said, until we start achieving those milestones, the decision to reinvest in the business is still open. But we are committed to making the decision on JackRabbit before the end of this fiscal year."

Finish Line operates about 590 Finish Line stores, in addition to the running-store unit.

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