As Finish Line Inc.’s stock price takes a beating and an ill-fated acquisition attempt winds through court proceedings, executives at the Indianapolis-based athletic retailer say they are trying to focus on the core business.
But there’s not much good news there, either.
CEO Alan Cohen told analysts during a conference call today that a lingering sales funk did not lift during the holiday shopping season. He said same-store sales have dropped by the mid-single digits percentage-wise in the fourth quarter but that margins are improving. The company yesterday reported its third straight quarterly loss.
Most of the woes stem from slow sales of clothing and other soft goods. Footwear sales, particularly Nike Shox, remained strong. Another high point was Under Armour, a high-end athletic brand that also plans to launch a shoe line.
The overall meek sales outlook, coupled with a legal tangle with Genesco Inc., the Tennessee company Finish Line agreed in June to purchase for $1.5 billion, sent shares tumbling today.
Finish Line’s stock price was down almost 20 percent this morning, to $1.78, a new 52-week low. The stock has shed more than 85 percent of its value this year.
“We are very concerned about what is happening to our stakeholders, shareholders and employees,” Cohen said during the call. “This is not what we had in mind; this is not what we had planned.”
Finish Line tried to back out of the Genesco deal after that company reported a second-quarter loss and lower third-quarter earnings. A judge ruled last week that Finish Line must complete the acquisition.
Now, Finish Line is waiting on another judgement. The company’s financier in the Genesco deal, UBS, filed a lawsuit in New York. UBS wants the deal to be declared void since the combined company would not survive a resulting mountain of debt.
Finish Line planned to put only $11 million into the acquisition of the 2,000-store Genesco chain, which is about twice the size of the Indianapolis chain. The company planned to finance the rest.
Finish Line yesterday reported a net loss of $15.95 million, or 34 cents per diluted share, for its fiscal third quarter, which ended Dec. 1, 2007. That compares to a loss of $2.98 million for the same quarter in 2006. Meanwhile, same-store sales dropped 3.6 percent.
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