Finish Line's First Quarter Reviewed By Barclays

Finish Line Inc FINL reported its 1Q17 EPS in-line with estimates. Barclays’ Matthew McClintock maintains an Equal Weight rating for the company, with a price target of $18. The EPS estimates for FY17 and FY18 remain unchanged at $1.50 and $1.90, respectively.

1Q Review

Finish Line reported its adjusted EPS at $0.23, in-line with expectations. Total sales came in at $453.5 million, representing 2.3 percent growth, and marginally ahead of the Barclays estimate of $450.6 million. Comp sales increased 1.5 percent, while average dollar per transaction was up 3.0 percent.

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Footwear and Basketball comps grew, while soft goods remained weak. “The Macy's business exhibited some momentum as sales from Macy's increased 22.8% to $73.1 million. However, the JackRabbit business slowed as sales declined (2.2)% to $23.5 million with comps up LSD,” analyst Matthew McClintock wrote.

Finish Line’s EBIT margin contracted 180bps to 3.3 percent, versus the Barclays estimate of 3.5 percent. This was on account of a 50bps contraction in gross margin to 30.8 percent and an increase in the SG&A rate by 120bps to 27.5 percent.

“The deleverage was due to incremental supply chain expenses, higher depreciation, and higher credit card cost, partially offset by expense savings from disciplined expense management,” McClintock commented.

Remodeling Program

Finish Line has undertaken its most extensive remodeling program in years, with an aim to improve stores with enhanced merchandise presentations and improved storytelling. The company expects to remodel about 50-60 stores by the end of FY17.

“Although FINL showed signs of improvements with its supply chain initiative, we remain on the sidelines given lower visibility into comp improvement,” the analyst added.

At time of writing, Finish Line was down 4.69 percent on the day, trading at $19.49.