Shares of The Finish Line (FINL -30%) are getting shellacked after the company warned about second quarter results and lowered guidance for fiscal 2018.
Finish Line guided second quarter EPS to $0.08-0.12, well below consensus. The company said comps fell 4.6% versus guidance for a low-single digit decline.
"The marketplace for athletic footwear became much more promotional as our second quarter progressed resulting in challenging sales and gross margin trends," said Sam Sato, Chief Executive Officer of Finish Line. "Despite these headwinds, we remained disciplined in managing our inventories and expect to end the quarter with inventory levels down approximately 7-8% compared with a year ago."
Finish Line also warned about third quarter results. The company expects third quarter comparable sales to decrease 3% to 5% and adjusted loss per share to be in the range of ($0.32) to ($0.40), compared with an adjusted loss per share of ($0.24) for the same period last year.
Based on year-to-date results and the expectation that sales and gross margin trends remain challenging through the remainder of the current fiscal year, the company now expects Finish Line comparable sales to decrease 3% to 5% versus its previous guidance for an increase in the low-single digit range. Adjusted earnings per share are now expected to be in the range of $0.50 to $0.60 for the 53-week fiscal year ending March 3, 2018, versus the previous guidance range of $1.12 to $1.23.
"Looking ahead, we are optimistic that the work we are doing with our vendor partners to enhance our merchandise assortments will start benefiting our top-line results early next year. At the same time, we continue to focus on building our omnichannel capabilities to strengthen our customer connections, improve our service levels and further capitalize on the shift toward digital commerce. We are also making good progress rightsizing the business to better compete in the current environment."
In the last three weeks, Dick's Sporting Goods (DKS), Foot Locker (FL) and now The Finish Line have disappointed investors. The market for sporting apparel and sneakers is highly competitive in the age of ecommerce and retailers in the space have become less relevant as the vendors like NIKE (NKE), Under Armour (UAA) and Adidas (ADDYY) focus more on going direct to consumer (DTC). Finish Line plans to report actual second quarter fiscal 2018 results on September 22, 2017.
The Board of Directors also unanimously adopted a shareholder rights plan -- intended to reduce the likelihood that any person or group would gain control of Finish Line through open market accumulation or coercive takeover tactics that the Board of Directors determines are not in the best interests of the Company and its shareholders.
British retailer Sports Direct (SDISY) has accumulated a 19.7% stake in the company.
Shares of Finish Line are set to open at an eight year low this morning, which means the stock's enterprise value is just above 2x EBITDA estimates for the year.