The severe winter condition was a large matter of concern during the holiday season, forcing consumers to restrain themselves from going out and shop. As a result, retailers found it difficult to stir demand, leading to poor sales. However, there were some footwear retailers such as Nike (NKE, Financial) who managed to swim against the currents and register stellar quarterly numbers. The American market proved to be an amazing one for Nike, which enabled the retailer to post a 7% jump in revenue.
On the other hand, there is another footwear player that posted lackluster results. However, the third quarter of Finish Line (FINL, Financial) didn’t fall prey to the prevailing economic conditions, and was able to attract many customers to its stores. Let us take a closer look.
Analyzing Thereof
Its revenue surged 16% to $406.5 million, over last year, largely beating estimates on both the top line and the bottom line. Despite higher promotional spending, its earnings jumped to $0.28 per share from $0.10 per share in the previous year. However, the company had made a number of mistakes previously, without which it could have done even better.
Mistakes Galore
The specialty footwear retailer could have witnessed a better top line if it did not launch its new version of its website just before the holiday season. Due to customers' less familiarity with the website, Finish Line suffered lower sales and had to finally withdraw the new version.
Moreover, the company lacks the ability to understand customers’ tastes and preferences. The shift of consumers’ interests to basketball products from running shoes was ignored by the retailer, leading to a loss in sales. This provided the opportunity for rivals such as Foot Locker (FL, Financial) to capture market share. Foot Locker is more focused on basketball products, which led to higher footfall and revenue.
Unlike Finish Line, retailers such as Nike and Foot Locker have been quite active on the innovation front. Nike has been bringing new technological products in the market, which is giving it a stronger foothold compared to its competitors. Even Foot Locker has been adding new colors to its products in order to attract customers’ attention.
However, Finish Line has been busy enhancing its biggest category. It recently bought a specialty chain that provides premium products in the running category. The company also cut down its product prices for the category, which hurt margins as well as profits.
Despite so many mistakes, Finish Line managed its quarter well, leading to a better performance.
Hopes for the future
Further, the recent partnership with Macy’s should help the retailer witness better sales. As per the deal, Finish Line will be handling all athletic footwear sales of Macy’s. It will also launch 450 new stores in Macy’s locations, and the deal is expected to generate $250 to $350 million of annual revenue in the future.
Additionally, Finish Line plans to shift its focus towards current trends as well as take proper cost management initiatives that might help the company to some extent.
Summing it up
Overall, the retail industry was going through a difficult phase, but most of the players have been exceptionally good through their well equipped strategies. Also, it has been increasingly difficult for Finish Line to outperform its competitors such as Nike and Foot Locker, in spite of efforts such as adding new stores and promoting heavily. Innovation plays a very important role in the industry, which is negligible in Finish Line’s case. Nonetheless, its deal with Macy’s and efficient management of costs has enabled the retailer to do well. Moreover, it is making efforts to bring in new products and attract customers through promotions. These efforts should be fruitful and makes Finish Line look like an interesting bet.
