The Finish Line

FINL : NASDAQ : US$27.05
Target: US$32.00

The Finish Line, Inc. offers performance and athletic
casual footwear, apparel and accessories for men,
through its United States specialty retail stores. In
addition to their retail locations, The Finish Line sells
merchandise through its website, The
company was founded in 1976 and is headquartered in
Indianapolis, Indiana.

All amounts in US$ unless otherwise noted.

Consumer & Retail — Footwear and Apparel
Investment recommendation
FINL posted a strong and clean Q4 beat of 87c vs. our 85c estimate.
Solid comps of 6.3% topped the consensus estimate of 5% despite
coming in shy of our 8% estimate, while impressive gross margin
expansion of 80bps (vs. our -60bps) drove a majority of the beat. As
expected, basketball (+mid-teens) was the key driver, while running
(+LSD) lagged due to the unfavorable weather resulting in footwear
comps +8.5%. Softlines comps were -6.7% as licensed NCAA apparel
was below plan, only partially offset by accessories and UA/North Face
apparel. Given well known challenges across retail, FINL managed its
business quite well, and we believe running is poised to re-accelerate
over the next few quarters. Looking to 2014, we continue to see multiple
top-line and margin drivers that include: improving running product
pipeline with multiple brands contributing (e.g., UA Speedform, NKE
Flyknit Free/Max, Adidas Springblade), continued basketball momentum
(Jordan and NKE), improving productivity out of M doors, and softening
occupancy expense. With these tailwinds, we view the company’s MSD
comp/HSD-LDD EPS growth guidance as conservative; reiterate BUY.
Investment highlights
 Current QTD comp trends are +LSD; however, it is important to note
that the Easter comparison is negatively impacting that number.
After this weekend, we would expect comps to rebound back to
+MSD. We expect the March/April combined comp to be +MSD.
Our $32 target is a blend of 15x 2014E EPS/7x EBITDA/DCF


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s