What happened

Shares of The Finish Line Inc. (NASDAQ:FINL) jumped as much as 11.7% in Friday's early trading, then settled to a 4% gain as of 2:00 p.m. EDT, after the footwear retailer announced better-than-expected fiscal second-quarter 2018 earnings.

The Finish Line confirmed that revenue for the quarter fell 3.3% year over year to $469.4 million, including a 4.5% decline in comparable-store sales. On the bottom line, that translated to adjusted earnings from continuing operations of $4.8 million, or $0.12 per share. These results compared favorably to The Finish Line's preliminary release late last month, when it told investors to expect roughly the same revenue and earnings per share in the range of $0.08 to $0.12.

The Finish Line store interior with neatly arranged footwear

Image source: The Finish Line.

So what

Nonetheless, Finish Line shares are still reeling from that preliminary announcement, which sent the stock down nearly 20% in a single day.

Finish Line CEO Sam Sato reiterated that his company's results were hurt by a "very promotional marketplace for athletic footwear," elaborating:

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.

Now what

Looking to the current fiscal third quarter, Finish Line expects comparable sales to fall 3% to 5%, which should result in an adjusted loss per share of $0.32 to $0.40. As such, The Finish Line also reiterated its latest full-year guidance, which calls for full-year comparable sales to decline 3% to 5%, and adjusted earnings per share of $0.50 to $0.60 (down from $1.06 last fiscal year).

I suppose it's encouraging that The Finish Line's Q2 earnings arrived at the high end of its admittedly disappointing guidance, but little has changed regarding its current situation operating in the difficult athletic footwear retail space. So while it's no surprise that Finish Line stock enjoyed a modest rebound today, I fear it has plenty of room to fall going forward.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.