Finish Line Inc (NASDAQ:FINL) investors hit the panic button after the athletic apparel maker negatively pre-announced weak FQ2 results and lowered guidance for the balance of the year. FINL shares are currently trading at $8.14, down $2.28 or -22%.
Specifically, the company announced preliminary 2Q EPS of $0.08 to $0.12, falling short of Wall Street projections for $0.36/$0.37. Management indicated that the significant EPS miss was driven by the difficult promotional environment and resulting sales/margin pressures, which they expect to continue for the rest of fiscal 2018. Updated FY guidance shifts down to $0.50 – $0.60 compared to Street expectations of $1.14/$1.10 and prior guidance of $1.12 – $1.23.
Finish Line CEO Sam Sato commented, “The marketplace for athletic footwear became much more promotional as our second quarter progressed resulting in challenging sales and gross margin trends […] Despite these headwinds, we remained disciplined in managing our inventories and expect to end the quarter with inventory levels down approximately 7-8% compared with a year ago.”
Sato continued, “We believe it is prudent to adjust our outlook as we expect the environment to remain highly competitive and promotional throughout the remainder of the year. In light of our disappointing second quarter results and revised projections for fiscal 2018, we will remain very disciplined in managing our expenses and inventories throughout the remainder of the year. Looking ahead, we are optimistic that the work we are doing with our vendor partners to enhance our merchandise assortments will start benefiting our top-line results early next year. At the same time, we continue to focus on building our omnichannel capabilities to strengthen our customer connections, improve our service levels and further capitalize on the shift toward digital commerce. We are also making good progress rightsizing the business to better compete in the current environment. In the past 12-months, we’ve made a number of changes that have created a more nimble organization and generated approximately $6 million in annualized savings, and over the past 2 years we’ve closed approximately 80 underperforming stores. We remain steadfastly focused on executing our strategic plan to drive increased shareholder value over the longer term.”
On the ratings front, Finish Line has been the subject of a number of recent research reports. In a report released today, FBR analyst Susan Anderson downgraded FINL to Hold. Canaccord’s Camilo Lyon maintained a Hold rating on the stock and has a price target of $8.00.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Susan Anderson and Camilo Lyon have a yearly average loss of 0.5% and 6.7% respectively. Anderson has a success rate of 47% and is ranked #3404 out of 4619 analysts, while Lyon has a success rate of 42% and is ranked #4456.
Sentiment on the street is mostly neutral on FINL stock. Out of 8 analysts who cover the stock, 6 suggest a Hold rating , one suggests a Sell and one recommends to Buy the stock. The 12-month average price target assigned to the stock is $11.00, which represents a potential upside of 6% from where the stock is currently trading.
The Finish Line, Inc. is a retailer of athletic shoes, apparel and accessories for men, women and kids throughout the U.S. It operates through two divisions: Finish Line brand name and Running Specialty Group. The Finish Line division is a retailer of athletic shoes, apparel, and accessories. The Running Specialty is a lifestyle retailer of precision-fitted running shoes, apparel, and accessories. Finish Line was founded by Alan H. Cohen, Larry J. Sablosky and David I. Klapper in 1976 and is headquartered in Indianapolis, IN.