Finish Line Inc. (NASDAQ: FINL)

Finish Line Inc. (FINL) is a retailer of athletic footwear, apparel and accessories in more than 700 stores in 47 states and online at www.finishline.com. The Company markets merchandise to men, women and children under the Finish Line brand.

Founded in 1976, the Company is headquartered in Indianapolis, Indiana.

Source: Reuters.com, SEC Filings.

Financial Summary

Source: Reuters.com, SEC Filings.

Analyst Consensus

The mean of 11 analysts polled by Thomson Reuters rate shares of FINL an “Outperform.”

Analyst Recommendations and Revisions

Source: Reuters.com, SEC Filings.

Investment Highlights

The U.S. retail environment continues to be challenging for the majority of retails. Wal-Mart’s earnings release on November 13 underscores the difficulties associated with dropping demand in discretionary spending. Same-store sales at the world’s largest retailer fell 0.4% from the previous quarter.

Record bankruptcies in the retail sector continue at a healthy clip, with the upcoming holiday season as the litmus test for hints of the next casualties in the retail space. Economist cannot point to a meaningful and sustainable source of income growth of U.S. households until the unemployment rate drops, which isn’t expected until late next year, at the earliest. Previous recessions weren’t accompanied by employment gains until approximately three quarters, at the earliest, following an upturn in gross domestic product.

In an earnings call in September, the Company stated it expects to struggle through the retail downturn and to operate in a conservative posture until concrete evidence of a turnaround in consumer spending emerges. Despite decreased demand for its products, the Company reported that footwear in the running category remains strong as well as an improved soft goods business, which affords the Company higher margins. Moreover, the Company’s Internet sales continue to grow, with a 2.3% increase for the second quarter and 7.6% registered so far this fiscal year.

Since late 2007, tighter inventory control and a stronger focus on profitability margins have taken priority at the Company, which included the exiting of the Man Alive line and the introduction of higher margin merchandise in its place. Excess retail space and overall expenses have been pruned back to coincide with the drop in sales.

Management’s priority centers upon positioning the chain to exploit the eventual rebound in consumer spending by maintaining a healthy balance sheet, controlling costs, watching inventory levels, and investing in areas of growth within the Company, while at the same time preserving its premium brand position and overall customer experience.

Capital expenditures totaled $4.4 million, year-to-date, while the Company expects total capital expenditures to reach a range of $10 million-13 million. As of the close of the second quarter, four stores were closed and one was opened, bringing the total stores closed to nine and one new store opened. Management expects to close 20-25 stores and open four to five new stores by year-end.

The Company ended the second quarter with approximately $143 million in cash and cash equivalents, compared with $65 million for the same period last year and $119 million for the prior quarter. No interest-bearing debt was reported, an important factor in a contracting retail sales environment.

In late September, Thomas Shaw of Stifel Nicolaus & Company said he expects earnings to increase in the next fiscal year, citing better-than-expected gross margin, management’s effective cost-cutting measures and a healthy balance sheet.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui?s=FINL

FINL trades below its 13-day moving average. This bearish sign is significant because the 13-day moving average is sloped downwardly as well.

The MACD for FINL currently indicates a bearish signal. The MACD is below the signal line, a 9-day moving average of the MACD. The MACD is also below the critical level of 0, which implies the past price action had been negative. Overall, the chart is bearish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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