Footwear retailer Finish Line (NASDAQ:FINL) is scheduled to report its fiscal Q1 2007 earnings numbers tomorrow after close of trading. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.

What analysts say:

  • Buy, sell, or waffle? 11 analysts follow Finish Line, with two of them saying buy, eight hold, and one sell.
  • Revenues. They expect Finish Line to report a 1% decline in sales to $288.2 million.
  • Earnings. A more serious stumble in profits, which are predicted to come in 65% lighter than last year at $0.09 per share, is expected.

What management says:
Finish Line reported its sales results for the quarter on June 1, and the results were pretty much as the analysts had feared. Sales were down 0.8%, slightly better than Wall Street's worst fears. The company leaned heavily on new store openings to achieve this result, however, because same-store sales were considerably weaker: down 7.2% year over year.

What management does:
Let's first take a quick look at the numbers for "what management does." I'll explore another aspect of "what management does" in a paragraph or two. Finish Line's rolling gross margins have been inching their way down all year long. But thanks to operating costs that have risen faster than sales (17% vs. 13% in the last six months, for example), the slight fall in gross margins has been magnified farther down the income statement, producing even greater damage to operating and net margins.

Margins %

11/04

2/05

5/05

8/05

11/05

2/06

Gross

31.7

31.6

31.7

31.5

31.4

31.5

Op.

7.8

8.3

8.4

7.9

7.6

7.6

Net

4.9

5.3

5.3

5

4.8

4.6
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

The Fool says:
According to the June sales release noted above, another thing that management has been doing is buying back shares. But what's notable here is how few shares the company has repurchased -- just 113,100 Class A common shares in Q1, and throughout the life of the buyback program, just 1.4 million shares out of an authorized 5 million.

It's not like the company lacks the cash to buy back its shares, either. With nearly $100 million in the bank, Finish Line could easily max out its entire authorization and then some. In fact, it could afford to buy back as many as 7.6 million more shares, or nearly 16% of all shares outstanding -- if the price was right. Yet despite the fact that Finish Line's stock has fallen 37% in price over the last year, the company isn't anteing up.

Clearly, Finish Line's management doesn't think its stock is attractive at this price. Which has this Fool wondering why investors would think otherwise.

Competitors:

  • Bakers Footwear (NASDAQ:BKRS)
  • Sport Chalet (NASDAQ:SPCH.B)

Suppliers:

  • Art Technology (NASDAQ:ARTG)
  • Interactive Intelligence (NASDAQ:ININ)
  • Timberland (NYSE:TBL)
  • Nike (NYSE:NKE)

Further Foolishness:

  • How did Finish Line perform last quarter? Read all about it in A Photo Finish.
  • And is the competition doing any better? Fellow Fool Ryan Fuhrmann says, "Not really."
  • What are the market's 10 best stocks?

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Fool contributor Rich Smith has no interest, short or long, in any company named above.