NEW YORK — Costs grew faster than sales for The Finish Line Inc. in its second quarter, pressuring profits below year-ago levels but still above Wall Street forecasts.
For the three months ended Aug. 31, the Indianapolis-based athletic footwear and apparel retailer reported net income fell 10.1 percent to $9.1 million, or 37 cents a diluted share. That compares to last year’s profits of $10.1 million, or 41 cents. Analysts had expected earnings of 35 cents per share.
Earnings were bolstered by a pre-tax $1.1 million repositioning reversal benefit. Excluding that item, net income would have been 34 cents a diluted share.
Sales for the quarter gained 3.8 percent to $204.3 million from $196.8 million last year as comparable-store sales ticked up 1 percent.
Chief executive officer Alan Cohen said in a statement, “Our performance during back-to-school selling season was below sales expectations and very promotional. Our ending inventory for the quarter was slightly higher than plan and we are taking necessary actions to get back to more appropriate levels by the end of the third quarter. Our sales plan for the third quarter to date is on plan and has continued to be promotional.”
Though sales increased appreciably, expenses grew faster, with the cost of sales, which includes occupancy expenses, rising 4.1 percent to $143.6 million from $137.9 million a year ago, and selling, general and administrative expenses escalating 9.2 percent to $47.5 million from $43.5 million in the year-ago quarter.
In other news, on Sept. 21 Finish Line’s corporate headquarters and distribution center were hit by a tornado and, while no one was injured, the storm rendered 70,000 square feet of 260,000 square feet of floor space. While the corporate office was operational by Sept. 23, Finish Line had to rent space in a nearby warehouse and did not resume receiving merchandise from vendors until Sept. 25. Because much of the inventory earmarked for 17 new stores slated to open in the coming months was damaged, some openings may be delayed.
Finish Line operated 459 stores at the end of the quarter.
For the six months, Finish Line posted a 13.3 percent increase in net earnings to $12.8 million, or 51 cents a diluted share. That compares to the year-ago half when the company recorded profits of $11.3 million, or 46 cents. Sales for the period rose 4.8 percent to $374.9 million.