Net income decreased 47% year over year to $9.9 million, while sales were down about 1% to $338.6 million over the same time. Management blames this on lower-than-expected sales in the critical back-to-school sales period, and higher-than-expected promotional activity. Not surprisingly, inventories were up 15% over last year's number, to about $323 million. All in all, it was an ugly quarter in a key selling period. Still, with book value around $9 a share and the stock only trading around $12.50, surely there must be value for shareholders here?
Clinton Group thinks so. It compares Finish Line's valuation ratios (book value, revenue, and EBITDA multiples) to competitor Foot Locker
Of the options Clinton offered, the hedge fund seems most enamored of a management-led buyout. In this case, shareholders should consider the deal -- after all, an immediate and substantial premium to the current price is certainly easier than enduring years of a lengthy, uncertain turnaround.
The board of directors, which owes its fiduciary responsibility to shareholders, would hopefully insist on a fair price, letting management deal with the challenges of a turnaround in private. In addition, with numerous private equity firms making deals left and right, if the price is too low, someone will up the ante. Sounds to me like shareholders potentially have an early Christmas present to anticipate.
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