Finish Line lowers outlook despite Q3 income

Finish Line CEO Glenn Lyon cited the company’s struggle to keep up with customer demand for new products even as the firm reported an increase in profitability for the third quarter.

The company reported an 11% improvement in net income during the third quarter, rising to $2.58 million from $2.32 million. Lower impairment and store closing charges, a slowed pace of growth in cost of sales, and an income tax benefit all helped spur the growth in profit.

“Third quarter comparable sales rebounded from second quarter trends, however merchandise margin pressure kept us from achieving our profitability plan,” Lyon said. “We’ll continue to invest in the omnichannel initiatives focused on delivering long-term financial goals. That said, we are adjusting our near-term capital spending plans and creating a more flexible expense structure to protect profitability until stronger full price selling trends reemerge.”

Net sales were $395.8 million, an increase of 9% from $364.5 million. Same-store sales rose 4.5%. Finish Line lowered its earnings per share guidance for fiscal 2014 and also expects same-store sales growth in the low-to-mid single digits for the year.

Company executives warned that the squeeze on the retailer’s margins are likely to continue in the near-term as the company works through stale inventory.