The Finish Line Inc. on Tuesday confirmed a two-week-old report that it was looking to rid itself of its underperforming JackRabbit chain of specialty running-shoe stores. But the Indianapolis-based retailer isn’t expecting to turn a profit on the sale.
In fact, the company said it expects to record an impairment charge related to divesting JackRabbit of about $44 million in the current quarter, which the retailer considers the third quarter of fiscal year 2017.
Finish Line uses an unusual fiscal calendar that runs from March through February. Its fiscal third quarter of 2017 began Aug. 28 and ends Nov. 26.
“After a comprehensive review, the company believes its long-term growth strategy and profitability-improvement plans align with simplifying the business to focus on the Finish Line brand and has decided to evaluate possible alternatives for JackRabbit, including a potential sale,” the company said in a press release.
Bloomberg News reported Nov. 2 that Finish Line was looking for a buyer for the JackRabbit division, which operates 70 stores under various names. Bloomberg cited unidentified sources who said JackRabbit could draw interest from private-equity firms and sporting-goods chains.
Finish Line declined to comment on the report at the time, but said Tuesday that its board of directors and management team were working with Peter J. Solomon Co. as their financial adviser on a potential sale.
“There is no definitive timeline or assurance that this process will result in a sale transaction,” Finish Line said. “The company does not intend to provide any further updates on this process unless or until the board has approved a final decision."
In a separate regulatory statement, Finish Line said “in conjunction with its exploration of strategic alternatives for JackRabbit, the company concluded that the fair value of JackRabbit was less than its carrying value,” thus leading to the anticipated loss. “The company does not expect that any portion of the impairment charge will result in future cash expenditures, or that it will otherwise impact the company’s liquidity, cash flows, or compliance with its debt covenants.”
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. Consumers have gravitated toward less technical sneakers, and there’s been declining participation rates in long-distance races.
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.
Finish Line operates about 590 Finish Line stores, in addition to the running-store unit. Shares in the company fell 1.3 percent Tuesday, to $22.65 each.