FINL - Finish Line

[rockket]

looks pretty cheap at current valuation (~11x forward earnings, ~9x ex-cash)

 

historically good business (~15%+ returns excluding recession), protected strategic/competitive position as distributor (Nike relies on FL and FINL heavily to distribute its products; gets inventory for cheap due to volume).

 

management had a few execution problems this past quarter (website timing/issues, product mix) and running shoes decelerating while bball accelerating (FINL is more running focused while FL is more basketball focused). there's good reason to believe these are all temporary, considering the historical track record of FINL and the cyclicality of footwear/apparel.

 

however, difficult to get a good read on the competency of current management.

 

would love to get any input from people who know this better than i do.

 

 

[stahleyp]

I have't taken a look at it, but wouldn't zappos be kind of a big issue? With AMZN's distribution and marketing, that could be some pretty tough competition.

[rockket]

It is a problem, but perhaps not as much as you might think, for a few reasons:

 

1) Finish line is an athletic wear/sneaker company - Zappos is a shoe company that happens to sell sneakers

 

From an interview with Footlocker's CEO.

 

Finish Line is a good competitor. We also compete with Dick’s (DKS) Sporting Goods. Zappos (division of Amazon – AMZN) sells sneakers, but it’s not a sports company, it’s much more female than male, and we’re much more male-oriented with the exception of Lady, and sneakers are a side business for Zappos. They sell shoes, some of which happen to be athletic. People who look to buy athletic shoes other than just for pure foot covering, saying “I want to know something about the people I’m buying them from, I want to know that they’re good shoes.” They know we stand by them."

 

2) Zappos has no price advantage; in many cases, Finishline can actually offer for cheaper due to their volume/existing relationship with Nike

 

3) Finishline offers a wider assortment of products, gets new products first, and have better stock of in-demand items. Athletes, sneakerheads, and people who know sneakers are going to go to footlocker and finishline first online to purchase them.

 

 

Eitherway, e-commerce is obviously a huge focus for FINL - much of the recent stock drop was associated with a fumbled site redesign right before black friday. Naturally online sales have been growing very quickly. But I think the incumbent advantage, volume discounts, and different customer segmentation will protect FINL's online business, at least in the medium term.

 

 

[eclecticvalue]

I agree Zappos does not have an advantage because prices are mostly the same. Nice find Rockket, I will look into it more.

[stahleyp]

Thanks for that, rockket. It does have some potential here.

[Guest Cameron]

$399M market cap $9.94 a share with $2.85 a share in cash with no debt.

0.82x B/V

0.20x PSR

9.5x FCF/P 6.5 ex cash

0.75 quick ratio

2.40 current ratio

4.43% dividend

 

They have been facing margin pressures due to promotional sales throughout the industry as well as a slight fall in revenue. FL and FINL both buy a large portion of their inventory from Nike and with the advent of Adidas taking away market share both have felt the same types of problems that Nike has been having. They have 347 stores within Macy's stores per their most recent annual report. Ironically this is their best performing segment in terms of sales % gains as they increased 6.8% y/y in their last 10Q while e-commerce sales 1.5% and B&M sales fell 5.9%.

 

While I don't like this company because of acquisition speculation it is apart a piece of the company that needs to be considered. The company implemented a poison pill "Shareholder Rights Plan" this was in reaction to Sports Direct buying shares in the open market, it restricts any one shareholder from owning more than 12.5% of the company as a way to "drive those who might want to do a takeover to the table" aka Sports Direct. Sports Direct as recently as the 20th of November has a 35% economic interest through different derivative contracts, this is up from 30% from their November the 2nd filing. 

 

Credits to DTEJD1997 for throwing this company's name out on the FL thread.

[mwtorock]

Been looking at this group of sports store for a while now. From numbers alone, there is no doubt it is cheap. All of them are cheap. To me, FL is a better shot to survive longer term but it is already up 30% from low. With Sports Direct in play, FINL may be worth a shot.

[Guest Cameron]

They reported their quarter: http://corporate.finishline.com/phoenix.zhtml?c=81647&p=irol-sec

 

Sold half my position, trades above book value now, footwear sales increased for the quarter, and were flat for 9 months ended.

Sales for the quarter increased 0.4% for B&M, 9.0% for e-commerce, 1.3% for stores within Macy's.

Margins continued to have pressure due to promotions.

Same store sales up 0.8%

 

I sold out of half my position and closed my small FL position.