Please ensure Javascript is enabled for purposes of website accessibility

Why Finish Line Inc Fell 20% on Friday

By Anders Bylund - Sep 25, 2015 at 4:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors hope the footwear retailer's new supply chain processes pay off in time for the holiday season.

What: Shares of specialty sporting goods retailer Finish Line (FINL) fell 20% on Friday, crushed by disappointing sales figures in the second quarter. The stock plunged to multiyear lows, reaching price levels not seen since the summer of 2013.

So what: For the second quarter, analysts had hoped to see earnings of roughly $0.57 per share on something like $491 million in top-line sales. Finish Line met the consensus earnings target but fell far short of revenue estimates. Sales increased just 3.5% year over year to land at $483 million, based on 1.5% higher comparable-store sales while analysts had expected more than double that organic growth rate.

Now what: Finish Line CEO Glenn Lyon underscored the healthy bottom-line result in spite of unsteady sales growth. "With our new supply chain system now live, we have accomplished a critical milestone which elevates our customer service levels even higher while driving efficiencies throughout our organization," Lyons said in a prepared press statement.

Kicking that efficiency into high gear is essential for the upcoming holiday season. Finish Line is struggling to find buyers for men's running shoes, partly due to not having hot new models on store shelves quickly enough. That gives competitors an edge, and Finish Line can't afford to lag behind in November and December.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Lyons understands this, of course, and is putting up his fighting dukes. "Right now, it's put up or shut up," he said on a call with analysts.

It's not exactly "do or die," since Finish Line still boasts a fundamentally healthy and pleasantly debt-free balance sheet. The company will survive a soft holiday season, and might even weather a downright disastrous one. Many a debt-ridden retailer hasn't had that kind of luxury, and gone belly up after a single holiday calamity.

That being said, Finish Line and Lyons will obviously be much better off if the new supply chain system comes up aces this holiday. Investors want to see a repeat of the fantastic holiday sales performances Finish Line pulled off in 2009 and 2011, not the disappointing growth figures it showed for the fourth quarters of 2010 and 2012.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Finish Line, Inc. Stock Quote
The Finish Line, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.