The Finish Line Inc. (FINL, Financial) recently revealed its fourth quarter results for fiscal 2015 wherein the company reported a 1.1% rise in non-GAAP earnings to $0.88 a share, beating the consensus estimate of $0.85 a share. Moreover, Finish Line’s consolidated net sales for the quarter grew 6.3% to $551.3 million compared to $518.8 million in the year-ago quarter, beating the consensus estimate of $550.3 million. The company attributed the revenue beat to its promotional as well as cost cutting activities. Following the results, Finish Line’s shares surged 8.19% to $25.90 in pre-market trading before falling 1.34% to $23.62 at closing bell.
Growth in comparable-store sales boosts numbers
While Finish Line opened one new store and shut down six underperforming stores during the fourth quarter to take the overall store number to 637, the company logged a 2.6% growth in comparable-store sales for the quarter. With operating expenses going up from the year-ago quarter’s 64.1% of total revenues to 65.9% during the fourth quarter, Finish Line’s gross profit stood at $188.04 million or 34.1% of total revenues. Operating income for the quarter was 11.6% of total revenues whereas GAAP net income came in at $40.82 million compared to the year-ago quarter’s $43.00 million. Consequently, although the company’s non-GAAP earnings grew 1% to $0.88 a share compared to the prior-year quarter, earnings were flat year-over-year at $0.87 a share on a GAAP basis.
CEO Glenn Lyon stated, “Our fourth quarter results, especially for our core business, represent a solid finish to a disappointing year… We quickly reduced expenses and gained better leverage to deliver earnings ahead of plan. At the same time, we made progress rebalancing our inventory to better align with customer demand. While there is still work to be done to achieve operational excellence throughout the company, we have a sound plan in place to improve profitability and continue our long track record of returning increased value to our shareholders..”
During fiscal 2015, Finish Line opened 10 new stores while it shut down 18 underperforming stores. For the full fiscal 2015, the company reported 9% growth in net sales to a record $1.82 billion, compared to $1.67 billion in FY2014, with comparable-store sales climbing 3.2%. The company also logged 9% growth in GAAP diluted EPS to $1.70 a share, including a one-time tax benefit, compared to the previous fiscal’s EPS of $1.56 a share. Finish Line repurchased 2.7 million shares with an overall worth of $68.1 million during the fiscal year, and also declared a new 5 million share-buyback program.
Outlook for FY2016 remains firm
For the fiscal 2016, Finish Line, which competes with businesses such as Foot Locker (FL, Financial), Hibbett Sports Inc. (HIBB, Financial) and the privately held The Sports Authority Inc. in the Specialty Sports Gear market, foresees both EPS and comparable-store sales to increase in the low single to mid single digit range compared to fiscal 2015 levels. Consensus estimates project a 9% growth in non-GAAP EPS to $1.81 per share for the full fiscal year.
Final thoughts
Finish Line’s Q4 results beat the consensus estimate by a small margin. While the company’s full fiscal results for FY2015 were in line with consensus estimates, Finish Line’s top line and bottom line grew significantly over the previous year levels. The company is also in the midst of efforts to rebalance inventory to better align with demands of its customers. With the company’s earnings projected to grow at an average annual rate of around 8.5%, experts peg the Finish Line stock as a "hold" for the short term.
