Finish Line swung to fiscal Q3 loss of US$107,000 from year-ago earnings of US$5.5M as sales rose 5.2% to US$296.6M; CEO blames unfavorable consumer response to new e-commerce site for below-plan sales results

INDIANAPOLIS, Indiana , January 9, 2013 (press release) – The Finish Line, Inc. (NASDAQ: FINL) today reported results for the 13-week and 39-week periods ended December 1, 2012.

For the thirteen weeks ended December 1, 2012:

  • Consolidated net sales increased 5.2% to $296.6 million.
  • Finish Line comparable store sales increased 3.6%.
  • Digital sales, which are included in the comparable store sales results, were up 25.0%.
  • Earnings per diluted share were breakeven.

“The third quarter was clearly more challenging than we anticipated,” said Chairman and Chief Executive Officer Glenn Lyon. “Sales came in below plan due primarily to a shift within athletic footwear trends and a less than favorable consumer response to the new ecommerce site we launched in mid November. Our top-line performance forced us to get more promotional to improve the composition of our inventory ahead of the important Holiday season. At the same time, we did not adjust our cost structure quickly enough in response to slowing sales trends.”

“Following our recent challenges,” Lyon continued, “we have taken immediate actions to improve near-term results. This includes reverting back to our previous ecommerce site, implementing cost controls that allow us to better manage expenses, and elevating the assortment of key basketball products in our stores and online. Looking ahead, we remain committed to developing a premier omni-channel business. We’ll also continue to evaluate the speed of our transformation to ensure that we are best positioned to achieve both our near- and long-term goals.”

Balance Sheet

As of December 1, 2012, consolidated merchandise inventories increased 7.6% to $301.7 million compared to $280.4 million as of November 26, 2011. For Finish Line, merchandise inventories increased by 6.3%.

As of December 1, 2012, the company had no interest-bearing debt and $168.2 million in cash and cash equivalents, compared to $216.6 million a year ago.

Share Repurchase Program

The company repurchased 1.0 million shares of its outstanding common stock in the third quarter, totaling $21.2 million. Year-to-date, Finish Line repurchased 2.5 million shares totaling $53.6 million. As of December 1, 2012, the company had 1.3 million shares remaining on its current 5 million share authorization. On January 3, 2013, the company’s Board of Directors amended the current repurchase program to increase the authorization by 5 million shares. This amendment also extends the authorization to repurchase shares through December 31, 2017.

Outlook

For the fourth quarter ending March 2, 2013, the company expects earnings per share to be between $0.74 and $0.78, compared to $0.74 in the fourth quarter of fiscal 2012, which excludes the $0.07 impact from the 53rd week. This guidance assumes fourth quarter comparable store sales increase in the low single digit range.

For the fiscal year ending March 2, 2013, the company now expects earnings per share to be between $1.47 and $1.51. This compares to its previous guidance for an increase of 6 to 9% over the $1.53 in fiscal 2012, which excludes the $0.07 impact from the 53rd week.

Q3 Fiscal 2013 Conference Call Today, January 4, 2013 at 8:30 a.m.

The company will host a conference call for investors today, January 4, 2013, at 8:30 a.m. Eastern. To participate in the live conference call, dial 866-923-8645 (U.S. and Canada) or 660-422-4970 (International), conference ID #80443876. The live conference call will also be accessible online at www.finishline.com. A replay of the conference call can be accessed approximately two hours following the completion of the call by dialing 855-859-2056, conference ID #80443876. This recording will be made available through Friday, January 11, 2013. The replay will also be accessible online at www.finishline.com.

About Finish Line

The Finish Line, Inc. is a premium retailer of athletic shoes, apparel and accessories. Headquartered in Indianapolis, Finish Line has 650 stores in malls across the U.S. and employs more than 11,000 sneakerologists who help customers every day connect with their sport, their life and their style. Online shopping is available at http://www.Finishline.com and mobile shopping is available at m.Finishline.com. Follow Finish Line on Twitter at Twitter.com/FinishLine and “like” Finish Line on Facebook at Facebook.com/FinishLineUSA.

Finish Line also operates, through a venture with Gart Capital Partners, the Running Specialty Group, including 25 specialty running shops in seven states and the District of Columbia under The Running Company and Run On! banners. More information is available at www.run.com.

Forward-Looking Statements

This news release includes statements that are or may be considered “forward-looking” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by the use of words or phrases such as, but not limited to, “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “build”, “may,” “should,” “will,” “estimates,” “indication”, “potential,” “optimistic,” “confidence,” “momentum”, “continue,” “lead to”, “evolve,” “expand,” “growth” or words and phrases of similar meaning. Statements that describe objectives, plans or goals also are forward-looking statements.

All of these forward-looking statements are subject to risks, management assumptions and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. The principal risk factors that could cause actual performance and future actions to differ materially from the forward-looking statements include, but are not limited to, the company’s reliance on a few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor); the availability and timely receipt of products; the ability to timely fulfill and ship products to customers; fluctuations in oil prices causing changes in gasoline and energy prices, resulting in changes in consumer spending as well as increases in utility, freight and product costs; product demand and market acceptance risks; deterioration of macro-economic and business conditions; the inability to locate and obtain or retain acceptable lease terms for the company’s stores; the effect of competitive products and pricing; loss of key employees; execution of strategic growth initiatives (including actual and potential mergers and acquisitions and other components of the company’s capital allocation strategy); and the other risks detailed in the company’s Securities and Exchange Commission filings. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. The forward-looking statements included herein are made only as of the date of this report and Finish Line undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.

    The Finish Line, Inc.
    Consolidated Statements of Operations (Unaudited)
    (In thousands, except per share and store data)
                         
   

Thirteen
Weeks Ended

   

Thirteen
Weeks Ended

   

Thirty-Nine
Weeks Ended

   

Thirty-Nine
Weeks Ended

 
    December 1,     November 26,     December 1,     November 26,  
    2012     2011     2012     2011  
                         
Net sales   $ 296,623       $ 282,011       $ 1,000,683       $ 912,999    
Cost of sales (including occupancy costs)     206,833         191,002         671,684         602,393    
Gross profit     89,790         91,009         328,999         310,606    
                         
Selling, general and administrative expenses     91,447         83,067         271,004         241,818    
Store closing costs     1         368         421         965    
Operating (loss) income     (1,658 )       7,574         57,574         67,823    
                         
Interest income, net     38         109         167         390    
(Loss) Income before income taxes     (1,620 )       7,683         57,741         68,213    
                         
Income tax (benefit) expense     (811 )       2,135         22,033         25,329    
Net (loss) income     (809 )       5,548         35,708         42,884    
Net loss attributable to redeemable noncontrolling interest     702         -         1,436         -    
Net (loss) income attributable to The Finish Line, Inc.   $ (107 )     $ 5,548       $ 37,144       $ 42,884    
                         
Diluted earnings per share attributable to The Finish Line, Inc. shareholders   $ -       $ 0.11       $ 0.72       $ 0.80    
                         
Diluted weighted average shares     49,949         52,082         50,977         53,076    
                         
Dividends declared per share   $ 0.06       $ 0.05       $ 0.18       $ 0.15    
                         
Finish Line store activity for the period:                        
Beginning of period     638         647         637         664    
Opened     14         4         27         4    
Closed     (1 )       (3 )       (13 )       (20 )  
End of period     651         648         651         648    
Square feet at end of period                 3,531,426         3,491,396    
Average square feet per store                 5,425         5,388    
                         
Running Company store activity for the period:                        
Beginning of period     19         -         19         -    
Acquired     5         18         5         18    
Opened     1         1         1         1    
Closed     -         -         -         -    
End of period     25         19         25         19    
Square feet at end of period                 78,120         57,302    
Average square feet per store                 3,125         3,016    
                         
                         
                         
    Thirteen Weeks Ended     Thirty-Nine Weeks Ended  
    December 1,     November 26,     December 1,     November 26,  
    2012     2011     2012     2011  
Net sales     100.0   %     100.0   %     100.0   %     100.0   %
Cost of sales (including occupancy costs)     69.7         67.7         67.1         66.0    
Gross profit     30.3         32.3         32.9         34.0    
                         
Selling, general and administrative expenses     30.8         29.5         27.1         26.5    
Store closing costs     -         0.1         -         0.1    
Operating (loss) income     (0.5 )       2.7         5.8         7.4    
                         
Interest income, net     -         -         -         0.1    
(Loss) income before income taxes     (0.5 )       2.7         5.8         7.5    
                         
Income tax (benefit) expense     (0.3 )       0.7         2.2         2.8    
                         
Net (loss) income     (0.2 )       2.0         3.6         4.7    
Net loss attributable to redeemable noncontrolling interest     0.2         -         0.1         -    
Net (loss) income attributable to The Finish Line, Inc.     -   %     2.0   %     3.7   %     4.7   %
                                         
      Condensed Consolidated Balance Sheets
               
      December 1,   November 26,   March 3,
      2012   2011   2012
      (Unaudited)   (Unaudited)    
ASSETS              
Cash and cash equivalents     $ 168,154   $ 216,570   $ 307,494
Merchandise inventories, net       301,654     280,409     220,405
Other current assets       30,904     21,366     24,849
Property and equipment, net       167,970     128,343     126,997
Other assets       41,103     37,737     31,751
Total assets     $ 709,785   $ 684,425   $ 711,496
               
LIABILITIES AND SHAREHOLDERS' EQUITY              
Current liabilities     $ 145,609   $ 147,983   $ 138,683
Deferred credits from landlords       28,139     30,035     27,737
Other long-term liabilities       18,462     15,335     15,539
Redeemable noncontrolling interest       4,535     -     -
Shareholders' equity       513,040     491,072     529,537
Total liabilities and shareholders' equity     $ 709,785   $ 684,425   $ 711,496

 

Source: The Finish Line, Inc.

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