Finish Line Issues Pre-Earnings Warning
Athletic footwear retailer Finish Line Inc (NASDAQ:FINL) has issued an early warning to its shareholders. The company has announced preliminary numbers for its second-quarter earnings, which are due to be released next month. Management has indicated that investors should brace themselves for the worst.
The company saw a 4.6% drop in comparable store sales in the most recent quarter, compared to the same period a year ago. Worse yet; the company is expecting the decline to trickle down to future quarters.
Management sees comparable store sales further declining between three and five percent in the remaining quarters of this fiscal year. The company had previously guided that it expected to see an increase in comparable sales in this fiscal year.
Shareholders of Finish Line stock should expect lower earnings per share than the company previously guided. Prior earnings per share (EPS) guidance for the full year ending March 2018 was set between the range of $1.12 and $1.23. The guidance has now been significantly slashed as management expects to deliver an EPS of $0.50 to $0.60 for the period.
Finish Line has been forced to trim its estimates because it feels pressure to sell its merchandise at marked-down prices. Promotional pricing since the beginning of this fiscal year has deeply hurt its margins and shrunk its bottom-line numbers.
According to Finish Line CEO Sam Sato, the retail industry for athletic footwear is becoming increasingly competitive. “The marketplace for athletic footwear became much more promotional as our second quarter progressed resulting in challenging sales and gross margin trends,” said Sato.
He also said that the company is turning its focus toward capitalizing on “the shift toward digital commerce.”
Sato’s comments come as the American retail industry undergoes historic evolution. The industry, which was once dominated by brick-and-mortar stores, is now being taken over by digital retailers that hold a significantly less of a physical presence.
Top of the list is Amazon.com, Inc. (NASDAQ:AMZN), which is substantially hurting traditional retailers through its customer-centric initiatives of cutthroat pricing and quick delivery service.
For Finish Line, in particular, Amazon poses significant threats after having formed strategic partnerships with Finish Line rivals like Nike Inc (NYSE:NKE). Nike has joined hands with Amazon to start selling its athletic footwear through Amazon’s digital channels. This is causing a major setback to sports retailers like Finish Line and Foot Locker, Inc. (NYSE:FL), which currently have a much smaller digital presence.
Regardless, Finish Line’s slumping sales and lowered guidance serve as a warning for investors of retail company stocks, as fears of more bankruptcies continue to scare the market.
“Finish Line Announces Preliminary Second Quarter Results and Updated Fiscal 2018 Outlook,” Finish Line Inc, August 28, 2017.