Sportswear retailer has a ‘disappointing finish’ in Q4, fiscal year

A combination of sluggish mall traffic, a shaky sporting goods industry, and poorly performing merchandise took a toll on The Finish Line in the fourth quarter and fiscal 2016.



For the fourth quarter ended February 25, 2017, the chain had a loss of $9.5 million, after reporting a profit in the same period a year earlier. The chain also posted a loss of 23 cents per share. Earnings, adjusted to account for discontinued operations and asset impairment costs, came to 50 cents per share. However, these results missed Wall Street expectations, which were 70 cents per share.



Consolidated net sales were $557.5 million, a decrease of 0.4% from the prior year period. However, sales topped Street forecasts of $548.7 million.



Same-store sales dropped 4.5%, however, its Finish Line Macy’s sales increased 35%.



“Our fourth quarter earnings performance represented a disappointing finish to a challenging year financially for our company,” said Sam Sato, CEO of Finish Line.



“As elements of our footwear offering did not resonate with our customers as we expected and the overall retail environment in February became increasingly difficult, we made the decision to get more aggressive on pricing to be competitive and clear slow moving product,” he said. “While this allowed us to end fiscal 2017 with clean inventory levels, it put significant pressure on fourth quarter product margins.”



For the year, consolidated net sales were $1.84 billion, an increase of 2.5% over the prior year. Same-store sales increased 0.3%, and Finish Line Macy’s sales increased nearly 30%.



“We know we must improve the execution of our merchandise strategies to drive increased full-price selling and fuel sustained comparable sales growth,” Sato said. “At the same time, we are confident that the numerous operational improvements we made throughout the past year have created a more efficient company with a stronger foundation to support enhanced profitability and increased shareholder value over the long-term.”



Looking ahead, to its fiscal year ending March 3, 2018 (a 53-week year), Finish Line expects comparable sales to increase low-single digits and earnings per share to be in the range of $1.12 to $1.23. This is an increase of approximately 6% to 16%, compared with the $1.06 non-GAAP diluted earnings per share in this fiscal year ended February 25, 2017, which was a 52-week year.



According to Sato, the additional week will contribute approximately $0.06 per share to the fourth quarter and full year fiscal 2018 results.