Finish Line Reports Second Quarter Fiscal Year 2018 Results
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.
The Finish Line, Inc.
MEDIA CONTACT:
Dianna L. Boyce, 317-613-6577
Corporate Communications
or
INVESTOR CONTACT:
Ed Wilhelm, 317-613-6914
Chief Financial Officer
View source version on businesswire.com: http://www.businesswire.com/news/home/20170922005292/en/