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The Finish Line Inc. Raises Guidance

The company reported a better-than-expected third quarter.

Shares of The Finish Line Inc. got a boost Friday as the company raised full-year guidance following a better-than-expected third quarter.

Investors approved of the results and guidance, sending shares up $1.63, or 5.2 percent, to $27.77 in the first 90 minutes of Nasdaq trading.

In the quarter ended Nov. 30, the Indianapolis-based retailer of athletic footwear and apparel reversed a small year-ago loss to post net income of $2.3 million, or 5 cents a diluted share, versus red ink of $107,000, or zero cents, in the prior-year quarter. Stripping out impairment charges, EPS was 6 cents, well above the 1 cent expected, on average by analysts.

 

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Revenues also exceeded expectations, rising 22.9 percent to $364.5 million from $296.6 million in the year-ago period and advancing 7.1 percent on a comparable-store basis. E-commerce currently accounts for 14 percent of sales and is projected to move to 20 percent.

Gross margin declined to 29.6 percent of sales from 30.3 percent in the third quarter of 2012.

Inventories at the end of the quarter totaled $360.5 million, 19.5 percent higher than the year-ago level of $301.7 million. The company said that the increase was primarily due to its arrangement to manage the athletic footwear inventory in Macy’s stores.

Updating analysts on a Friday morning conference call, Glenn Lyon, chairman and chief executive officer of the chain, said there are currently branded Finish Line shops in 181 Macy’s stores and that, by March, the company should be on pace to open in 20 to 30 stores a month. He said revenue attributable to the Macy’s relationship was “tracking towards the low end” of previous guidance for revenues of between $130 million and $150 million in sales for the current year.

“Long-term, we still believe firmly that we can do between $250 million and $350 million top-line with Macy’s and it’s a great opportunity for us to grow sales and earnings as a company,” he said.

 

The company now expects full-year comps to grow between 3 and 4 percent, versus prior estimates of a low-single-digit increase, and EPS to expand between 9 and 12 percent to between $1.60 and $1.65. Earlier, the firm had expected a mid-single-digit increase.

For the nine months, net income contracted 8.7 percent to $33.9 million, or 69 cents a diluted share, as revenues grew 15.1 percent to $1.15 billion.

Finish Line operates 658 stores.