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$6.02 0.03 (0.50%)
1/8/2009 4:00 PM

The Finish Line, Inc. (FINL)

CAPS Rating:
*

A mall-based specialty retailer of men's, women's and children's brand name athletic and lifestyle footwear, active wear and accessories in the United States.

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Avatar NetscribeRetail (83.19) Submitted: 1/03/07 12:40 AM : Underperform Start Price: $14.11 FINL Score: 21.30

Finish Line is a mall based specialty retailer operating under the Finish Line, Man Alive and Paiva brand names. Finish Line stores offer athletic, lifestyle, and outdoor footwear for men, women and children. The Man Alive stores provide jeans, t-shirts, and polo shirts whereas the Paiva stores mainly offer black pants, t-shirts and rib tanks. The company operates 692 Finish Line Stores, 88 Man Alive Stores and 12 Paiva stores across U.S.

The $19 billion US athletic sport shoe market is largest in the world. Though the market potential is high, the company has not been able to capitalize on the opportunity, which is reflected in its declining revenue growth. Finish Line faces stiff competition from players like FootLocker and Payless ShoeSource, which are aggressively taking strong initiatives to expand their foothold in the market.

The recent financial performance of the company has also been disappointing with over 3% decrease in same-store sales. Softgoods segment contributing about 21% to the sales has also suffered with over 8% decline in revenues. Gross margin has also declined despite rise in average selling price. Company expects operating margin strains to continue in the next quarter due to the pressure of clearing the aged inventories.

On a positive side, Finish Line company wants to explore lifestyle footwear market. However success fairly depends on the business interests of the vendors. To add to the woes, over the last couple of years, the percentage of their business from their vendor Nike has been decreasing. Moreover, the company has not been able to sustain their profit margins since past many quarters. Also, same store sales have been continuously falling. With dull financial performance and no strong initiatives in line, the stock is expected to pass through a bearish phase.

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Avatar NetscribeRetail (83.19) Submitted: 5/03/07 8:05 AM

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Is Finish Line Finished?

Company’s fiscal 2007 performance does raise the above notion. Finish Line (FINL) experienced weaknesses in several of its key offerings, especially soft goods in the apparels. Revenues grew only by 2.5 percent thanks to the mercy shown by the extra week in the fiscal. Bottom-line dropped massively due to the deleveraging of operating expenses and markdowns undertaken to clear off the inventories.

Encouraged by the prior performance, management is gung-ho about offering sport-style footwear products to drive sales in 2007. However, the entire footwear segment constitutes about 10% of the FINL’s business and initiatives, albeit successful, would not aid much in driving the overall top line performance. Company’s prime concern is its apparel segment, which provokes annoyance. Branded apparel sales delivered a drab performance and the company is scouting for opportunities to increase penetration of Nike and Under Armour in this area. FINL’s efforts to develop better relations with Nike does not receive an instant green signal as players like Footlocker also look geared up for the battle. Moreover, management believes that such curative actions are just in the experimental mode and thus do not warranty immediate success.

Company looks less aggressive in 2007, which could be substantiated from the fact that it has lowered its pace of store openings. Also, Nike is the prime vendor of FINL as it accounts for more than 50% of the company’s offerings. Nike’s recent plans to foray into the retail could further axe the struggling FINL. On the management front, appointment of Sam Sato as the chief merchandising officer is a good news considering his prior rich experience in the athletic products and business relationships. But, by and large, it would be a prudent decision to sluice this scrip from the portfolio.

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