Market Overview

Finish Line Reports Second Quarter Fiscal Year 2018 Results

Share:

The Finish Line, Inc. (NASDAQ:FINL) today reported results for the
thirteen weeks ended August 26, 2017.

For the thirteen weeks ended August 26, 2017:

  • Consolidated net sales were $469.4 million, a decrease of 3.3% over
    the prior year period.
  • Finish Line comparable store sales decreased 4.5%.
  • Finish Line Macy's sales increased 5.6%.
  • On a GAAP basis, diluted earnings per share from continuing operations
    were $0.08.
  • Non-GAAP diluted earnings per share from continuing operations, which
    primarily excludes the impact from store impairment charges, were
    $0.12.

"Our second quarter results were shaped by a very promotional
marketplace for athletic footwear," said Sam Sato, Chief Executive
Officer of Finish Line. "With industry headwinds weighing on our sales
and margin trends, we remain disciplined in managing our expenses and
inventories. While we are planning for a challenging retail environment
in the near-term, we are confident that the merchandise, digital,
in-store and operational initiatives currently in place will allow us to
achieve our current full year outlook and best position the company to
deliver increased shareholder value over the long-term."

Balance Sheet

As of August 26, 2017, consolidated merchandise inventories decreased
11.1% to $308.1 million compared to $346.4 million as of August 27, 2016.

As of August 26, 2017, the company had no interest-bearing debt and
$114.9 million in cash and cash equivalents.

Outlook

The company's outlook remains unchanged from the update given August 28,
2017 which is Finish Line comparable sales to decrease 3% to 5% versus
its previous guidance for an increase in the low-single digit range.
Adjusted earnings per share are now expected to be in the range of $0.50
to $0.60 for the 53-week fiscal year ending March 3, 2018, versus the
previous guidance range of $1.12 to $1.23, and compared with adjusted
earnings per share of $1.06 for the fiscal year ended February 25, 2017,
which was a 52-week year. The company estimates that the additional week
will contribute approximately $0.06 per share to fourth quarter and full
year fiscal 2018 results.

For the third quarter ending November 25, 2017, the company expects
Finish Line comparable sales to decrease 3% to 5% and adjusted loss per
share to be in the range of ($0.32) to ($0.40), compared with an
adjusted loss per share of ($0.24) for the same period last year.

For the fourth quarter ending March 3, 2018, a 14-week quarter, the
company expects Finish Line comparable sales to decrease 3% to 5% and
adjusted earnings per share to be in the range of $0.50 to $0.58
inclusive of the $0.06 per share contribution from the extra week,
compared with earnings per share of $0.50 for the fourth quarter ended
February 25, 2017, a 13-week quarter.

Q2 Fiscal 2018 Conference Call Today, September
22, 2017 at 8:30 a.m.

The company will host a conference call for investors today, September
22, 2017, at 8:30 a.m. Eastern. To participate in the live conference
call, dial 866-923-8645 (US and Canada) or 660-422-4970 (International),
conference ID #82802203. The live conference call will also be
accessible online at www.finishline.com.
A replay of the conference call can be accessed approximately two hours
following the completion of the call by dialing 855-859-2056, conference
ID #82802203. This recording will be made available through Sunday,
October 22, 2017. The replay will also be accessible online at www.finishline.com.

Disclosure Regarding Non-GAAP Measures

This report refers to certain financial measures that are identified as
non-GAAP. The company believes that these non-GAAP measures, including
selling, general, and administrative expenses, operating income, income
tax expense, net income from continuing operations, and diluted earnings
per share from continuing operations, are helpful to investors because
they allow for a more direct comparison of the company's year-over-year
performance and are useful in assessing the company's progress in
achieving its long-term financial objectives. This supplemental
information should not be considered in isolation or as a substitute for
the related GAAP measures. A reconciliation of the non-GAAP measures to
the comparable GAAP measures can be found in the company's Form 8-K
filed with the Securities and Exchange Commission with this release.

About The Finish Line, Inc.

The Finish Line, Inc. is a premium retailer that carries the latest and
greatest shoes, apparel, and accessories. Headquartered in Indianapolis,
Finish Line runs approximately 950 branded locations in U.S. malls and
shops inside Macy's department stores. Finish Line employs more than
14,000 associates who connect customers to sneaker culture through style
and sport. Shop online at www.finishline.com
or get access to everything on the Finish Line app. Also keep track of
what's fresh by following Finish Line on Instagram,
Snapchat, and Twitter.

Forward-Looking Statements

This news release includes statements that are or may be considered
"forward-looking" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements generally can be identified by the use
of words or phrases such as "believe," "expect," "future," "anticipate,"
"intend," "plan," "foresee," "may," "should," "will," "estimates,"
"outlook," "potential," "optimistic," "confidence," "continue,"
"evolve," "expand," "growth," or words and phrases of similar meaning.
Statements that describe objectives, plans, or goals also are
forward-looking statements.

All of these forward-looking statements are subject to risks, management
assumptions, and uncertainties that could cause actual results to differ
materially from those contemplated by the relevant forward-looking
statements. The principal risk factors that could cause actual
performance and future actions to differ materially from the
forward-looking statements include, but are not limited to, the
company's reliance on a few key vendors for a majority of its
merchandise purchases (including a significant portion from one key
vendor); the availability and timely receipt of products; the ability to
timely fulfill and ship products to customers; fluctuations in oil
prices causing changes in gasoline and energy prices, resulting in
changes in consumer spending as well as increases in utility, freight,
and product costs; product demand and market acceptance risks;
deterioration of macroeconomic and business conditions; the inability to
locate and obtain or retain acceptable lease terms for the company's
stores; the effect of competitive products and pricing; loss of key
employees; execution of strategic growth initiatives (including actual
and potential mergers and acquisitions and other components of the
company's capital allocation strategy); cybersecurity risks, including
breach of customer data; a major failure of technology and information
systems; and the other risks detailed in the company's Securities and
Exchange Commission filings. Readers are urged to consider these factors
carefully in evaluating the forward-looking statements. The
forward-looking statements included herein are made only as of the date
of this report and Finish Line undertakes no obligation to publicly
update these forward-looking statements to reflect subsequent events or
circumstances.

 
The Finish Line, Inc.
Consolidated Statements of Income (Unaudited)
(In thousands, except per share and store/shop data)
Thirteen Weeks Ended   Twenty-Six Weeks Ended
August 26,   August 27, August 26,   August 27,
2017 2016 2017 2016
Net sales $ 469,352 $ 485,156 $ 899,124 $ 915,200
Cost of sales (including occupancy costs) 339,020   331,447   641,365   628,314  
Gross profit 130,332 153,709 257,759 286,886
Selling, general, and administrative expenses 121,772 116,511 234,184 234,060
Impairment charges and store closing costs 2,335   182   4,493   182  
Operating income 6,225 37,016 19,082 52,644
Interest income (expense), net 10   (32 ) 10   (26 )
Income from continuing operations before income taxes 6,235 36,984 19,092 52,618
Income tax expense 2,888   13,627   7,748   19,173  
Net income from continuing operations 3,347 23,357 11,344 33,445
Net loss from discontinued operations, net of tax (504 ) (1,282 ) (361 ) (1,744 )
Net income $ 2,843   $ 22,075   $ 10,983   $ 31,701  
Diluted earnings per share:
Continuing operations 0.08 0.56 0.28 0.79
Discontinued operations (0.01 ) (0.03 ) (0.01 ) (0.04 )
Diluted earnings per share 0.07   0.53   0.27   0.75  
Diluted weighted average shares 40,260   41,122   40,311   41,506  
Dividends declared per share $ 0.11   $ 0.10   $ 0.22   $ 0.20  
 
Finish Line store activity for the period:
Beginning of period 571 586 573 591
Opened 4 5
Closed (2 ) (5 ) (4 ) (11 )
End of period 569   585   569   585  
Square feet at end of period 3,175,989 3,249,455
Average square feet per store 5,582 5,555
Branded shops within department stores activity for the period:
Beginning of period 375 392 374 392
Opened 3 4
Closed   (1 )   (1 )
End of period 378   391   378   391  
Square feet at end of period 533,219 509,880
Average square feet per shop 1,411 1,304
 
   
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 26,   August 27, August 26,   August 27,
2017 2016 2017 2016
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales (including occupancy costs) 72.2   68.3   71.3   68.7  
Gross profit 27.8 31.7 28.7 31.3
Selling, general, and administrative expenses 26.0 24.0 26.0 25.5
Impairment charges and store closing costs 0.5   0.1   0.6    
Operating income 1.3 7.6 2.1 5.8
Interest income (expense), net        
Income from continuing operations before income taxes 1.3 7.6 2.1 5.8
Income tax expense 0.6   2.8   0.8   2.1  
Net income from continuing operations 0.7 4.8 1.3 3.7
Net loss from discontinued operations, net of tax (0.1 ) (0.2 ) (0.1 ) (0.2 )
Net income 0.6 % 4.6 % 1.2 % 3.5 %
 
 
Condensed Consolidated Balance Sheets
August 26, 2017   August 27, 2016   February 25, 2017
(Unaudited) (Unaudited)
ASSETS
Cash and cash equivalents $ 114,918 $ 114,301 $ 90,856
Merchandise inventories, net 308,074 346,385 331,146
Other current assets 46,045 34,972 69,408
Assets held for sale 76,089
Property and equipment, net 153,347 153,453 157,594
Intangible assets, net 86,215 92,542 90,303
Other assets, net 5,440   7,579   7,161
Total assets $ 714,039   $ 825,321   $ 746,468
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 195,241 $ 231,379 $ 221,971
Liabilities held for sale 16,210
Deferred credits from landlords 34,255 32,021 32,133
Other long-term liabilities 30,919 30,517 40,866
Shareholders' equity 453,624   515,194   451,498
Total liabilities and shareholders' equity $ 714,039   $ 825,321   $ 746,468
 
   

Reconciliation of Selling, General, and Administrative Expenses,
GAAP to Selling, General, and Administrative Expenses, Non-GAAP
(Unaudited)

(In thousands)

 
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 26, 2017   August 27, 2016 August 26, 2017   August 27, 2016
Selling, general, and administrative expenses, GAAP $ 121,772     26.0 % $ 116,511     24.0 % $ 234,184   26.0 % $ 234,060     25.5 %
Employee severance, retirement, and other costs         (338 )      
Selling, general, and administrative expenses, Non-GAAP $ 121,772   26.0 % $ 116,511   24.0 % $ 233,846   26.0 % $ 234,060   25.5 %
 
   
Reconciliation of Operating Income, GAAP to Operating Income,
Non-GAAP (Unaudited)
(In thousands)
 
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 26, 2017   August 27, 2016 August 26, 2017   August 27, 2016
Operating income, GAAP $ 6,225     1.3 % $ 37,016     7.6 % $ 19,082     2.1 % $ 52,644     5.8 %
Employee severance, retirement, and other costs 338
Impairment charges and store closing costs 2,335   0.5   182   0.1   4,493   0.6   182    
Operating income, Non-GAAP $ 8,560   1.8 % $ 37,198   7.7 % $ 23,913   2.7 % $ 52,826   5.8 %
 
   
Reconciliation of Income Tax Expense, GAAP to Income Tax Expense,
Non-GAAP (Unaudited)
(In thousands)
 
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 26, 2017   August 27, 2016 August 26, 2017   August 27, 2016
Income tax expense, GAAP $ 2,888     0.6 % $ 13,627     2.8 % $ 7,748     0.8 % $ 19,173     2.1 %
Tax effect of:
Employee severance, retirement, and other costs 130
Impairment charges and store closing costs 895   0.2   70   0.1   1,726   0.3   70    
Income tax expense, Non-GAAP $ 3,783   0.8 % $ 13,697   2.9 % $ 9,604   1.1 % $ 19,243   2.1 %
 
   

Reconciliation of Net Income From Continuing Operations, GAAP to
Net Income From Continuing Operations, Non-GAAP (Unaudited)

(In thousands)
 
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 26, 2017   August 27, 2016 August 26, 2017   August 27, 2016
Net income from continuing operations, GAAP $ 3,347     0.7 % $ 23,357     4.8 % $ 11,344     1.3 % $ 33,445     3.7 %
Employee severance, retirement, and other costs, net of income taxes 208
Impairment charges and store closing costs, net of income taxes 1,440   0.3   112     2,767   0.3   112    
Net income from continuing operations, Non-GAAP $ 4,787   1.0 % $ 23,469   4.8 % $ 14,319   1.6 % $ 33,557   3.7 %
 
   

Reconciliation of Diluted Earnings Per Share From Continuing
Operations, GAAP to

Diluted Earnings Per Share From Continuing Operations, Non-GAAP
(Unaudited)

 
Thirteen Weeks Ended Twenty-Six Weeks Ended
August 26,   August 27, August 26,   August 27,
2017 2016 2017 2016
Diluted earnings per share from continuing operations, GAAP $ 0.08 $ 0.56 $ 0.28 $ 0.79
Employee severance, retirement, and other costs, net of income taxes
Impairment charges and store closing costs, net of income taxes 0.04     0.07  
Diluted earnings per share from continuing operations, Non-GAAP $ 0.12   $ 0.56   $ 0.35   $ 0.79

Note: See Disclosure Regarding Non-GAAP Measures above.

View Comments and Join the Discussion!