Finish Line (FINL, Financial) is a mall-based specialty shoe retailer and specializes in athletic footwear. Its shares have risen by 5% since the beginning of the year. Because of increasing demand for athletic shoes and apparel, such retailers have witnessed a growth in the business. For instance, people wear athletic apparel for their casual work also. This has created more demand for such products.
Finish Line, therefore, managed to register a great fourth quarter due to this rise in demand. The numbers were in line with the Street’s estimates, sending its share prices higher. Let’s take a closer look at it.
Digging into the details
Driven by increased demand for its products, revenue for the quarter surged 6% to $551.3 million, over last year. This was slightly ahead of the analysts’ estimate of $550.3 million and was driven by a comparable store sales growth of 2.6%. Higher sales of the company were also driven by higher promotions made by the retailer, which attracted customers especially during the holiday season.
In fact, the store traffic was at the highest level in the fourth quarter. However, the products failed to resonate with the customers as much as expected by the retailer. Therefore, Finish Line plans to focus on making its products better and providing excellent service to its customers.
The gross margin of the company contracted 179 basis points to 34.11%, owing to higher input costs and increase in promotions during that time. The earnings of the company stood at $0.87 per share, flat over last year and higher than the analysts’ estimate of $0.85 per share. Excluding one-time costs related to impairments and store closures, the bottom line came in at $0.88 per share. Further, the company is trying to control costs by closing underperforming stores, which will help in boosting the bottom line in the future.
Comparison to its peers
Finish Line’s peer Foot Locker (FL, Financial) registered great fourth quarter numbers as growing demand for basketball shoes resulted in higher sales. Foot Locker’s top line jumped 7% and was ahead of the Street’s estimates. Also, the retailer registered a same store sales growth of 10.2%. The bottom line also surged 22%, clocking in at $0.22 per share. Thus, the results were much better than that of Finish line.
Nonetheless, Finish Line plans to have a better year by making a number of strategies, which includes the addition of new products to its portfolio. It plans to have an enhanced assortment of products, with a focus on basketball and running footwear. Moreover, it plans to expand its presence by having shops inside Macy’s stores.
Further, demand for women and kids’ footwear is on the rise. This should help the company in reporting more sales. Additionally, new products from Nike and Adidas should help in increasing sales.
Final verdict
Although Finish Line’s products were not so attractive, its efforts to grow are. With the aforementioned strategies, the retailer is expected to perform better. Moreover, it has authorized a new share buyback plan of 5 million shares, which will be bought in the next few years. In addition, it provided a decent guidance for FY 2016. These factors, coupled with its cost cutting initiatives and share buyback program, should help with registering a higher bottom line. Therefore, this company deserves a closer look.
