A Photo Finish

Last month, a fleet of foot stocks were investigated, from powerhouse Nike (NYSE: NKE  ) to pint-sized Stride Rite (NYSE: SRR  ) . Today, following the release of its latest results, we will look into a company that helps bring the manufacturer's shoe to the consumer's foot -- Finish Line (Nasdaq: FINL  ) .

Total fourth-quarter sales were solid, growing 10.5% from the same period a year ago, with new store openings fueling most of the top-line growth. Finish Line added 66 new stores, increasing its unit count by 10% in fiscal 2006.

Sales from stores open more than a year were of little help, however, since comps for the period were flat year over year. Finish Line's struggles with its women's business were one significant reason for the slump. Women's fashion tastes are moving away from performance and athletic styles, toward boots, sandals, and low-profile options. On top of this developing trend, Finish Line is facing increased competition from fellow mall residents vying for this demographic.

On a positive note, the company is seeing strong results in its men's and kids' businesses. Finish Line plans to increase the presence of brands like Puma and Pony to keep momentum in the kids' market. Men's sales are doing well, particularly in the running and performance categories. New Nike product introductions in fiscal 2007, including a retro Michael Jordan shoe, will keep sales in this category strong.

With the men's and kids' categories performing nicely, the company will be concentrating its efforts on improving women's sales. This strategy includes a new store concept, set to launch this spring, called Paiva. Just as Finish Line has targeted men using its Man Alive stores, it will use Paiva to target fashion-conscious women. Initially, it plans to open sites in some of the most well-trafficked malls in America.

Beyond improving women's sales, Finish Line's growth strategy will also rely on expanding its direct-to-consumer operation. FinishLine.com has been the fastest-growing unit for the company, growing sales by 40% in fiscal 2006. The company expects online sales to remain strong in the quarters ahead.

Finish Line will face some challenges in fiscal 2007 as it tries to ramp up sales in its women's division. Even so, earnings and revenues are expected to grow at a double-digit blended rate of roughly 12% this year. With the market recently cooling on Finish Line's shares, this provides an opportunity to take a closer look at what may be a solid long-term investment.

Lace up additional Foolishness:

Fool contributor Jeremy MacNealy does not have any financial interest in any companies mentioned.


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