Please ensure Javascript is enabled for purposes of website accessibility

Shares of Finish Line Inc. Down 10% After Earnings: Here's What's Happening

By Jason Hall - Jan 7, 2016 at 3:49PM

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

Declining sales and a management shakeup are being compounded by an all-around terrible day for investors.

What: Shares of athletic footwear seller Finish Line Inc. (FINL) are down 9.6% at 3:15 p.m. ET on Jan. 7, and have been down nearly 10% for most of the trading day, after the company released its third-quarter earnings report before the market open today. That puts the company's stock down more than 40% in the past six months:

FINL Chart

FINL data by YCharts.

So what: Finish Line disappointed the market with a 4% decrease in total revenue, a 6% drop in comparable-store sales, and a much bigger $0.49 loss per share than was expected, but it was also announced that longtime CEO Glenn Lyon would be retiring at the end of February. 

The company blamed a new inventory and warehouse control system for the poor financial result, stating that the new system wasn't able to handle the volume of orders processed. The good news was that once those problems were rectified, business results improved. Since the start of the fourth quarter in December, the company says that comparable sales are up more than 6%. 

Now what: Finish Line probably couldn't have picked a worse day to issue its earnings release, with the severe market turmoil underway largely based on uncertainty around China. If you missed it, the Chinese stock market was open for less than a half-hour today before being closed, after plummeting 7%. As of this writing, U.S. stocks are getting hammered, with most major American Indexes down more than 2% on the day. 

In other words, today's sell-off for Finish Line is two parts company-related stuff in the earnings miss and CEO transition and one part market madness. 

But with that said, Finish Line doesn't look like a buy at this point. Even when adjusting for the self-inflicted supply chain issues that cost millions in lost sales, the company still would have reported a net loss and continues to struggle to adapt quickly to a changing retail environment. 

That could change, but there are better retail bets than this footwear specialist. 

Jason Hall has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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 analyst team.

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 08/08/2022.

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.