Finish Line Inc (NASDAQ:FINL) is not currently enjoying its time in the business. The company has had to deal with several challenges, many of which eat into its margins and reduce its profitability. In its most recent quarter, 3Q, the company posted adjusted earnings per share that fell short of the Wall Street estimates. That happened because of some charges and pressure on profit margin.
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Margin distress
Finish Line Inc (NASDAQ:FINL) now expects to reduce its spending in the current challenging pricing environment until things improve. The move to cut spending is expected to protect profitability. The trouble with pricing saw the company’s gross margin decline to 28.2% in the most recent quarter compared with 29.6% in the same quarter a year earlier. The company anticipates continued margin squeeze in the near term.
Strong demand for fresh inventory
Although Finish Line Inc (NASDAQ:FINL) is facing pricing challenges that have adversely impacted the profits, the company is faced with overwhelming demand for new products. CEO, Glenn Lyon, said their customers are looking for a steady supply of new products. The surge in demand has helped to boost revenue in the company, especially looking at the most recent quarterly results.
Nonetheless, there are segments that are not doing very well already. The sale of running shoes is not as good as that of basketball styles. According to the data supplied by SportScanInfo, the sale of running shoes has this year increased 3.5% while that of basketball shoes has increased 15.7%.
Financial outlook
Finish Line Inc (NASDAQ:FINL) earned $2.6 million or $0.05 per share in the most recent quarter. That compared with $2.3 million or $0.05 per share in the same quarter a year earlier. However, on an adjusted basis, the company suffered a loss of $0.02 per share, yet analysts on the average expected positive earnings of $0.01 per share for the quarter.
Revenue in the most recent quarter came in at $395.8 million and topped the consensus estimate of $387.6 million. The figure was also up from $364.5 million in the comparable quarter a year earlier.
Finish Line Inc (NASDAQ:FINL) cut its 2015 adjusted earnings guidance, which now also falls below the consensus estimate.
