Mall-based specialty retailer The Finish Line Inc. (FINL) swung to a GAAP net income of $6.6 million during fiscal 2010 third quarter, from a GAAP net loss of $8.8 million in the year-ago period primarily due to a income tax gain. Excluding the gain, the company recorded breakeven earnings per share, compared to a loss of 12 cents per share last year. The result came in well ahead of the Zacks Consensus Estimate for a 10-cents loss. Shares of Finish Line increased nearly 9% after the news to close at $10.89 yesterday on the Nasdaq.
The company reported a marginal 0.2% decline in sales to $240.1 million during the quarter, compared to $240.6 million in the year-ago quarter. The decrease was mainly caused by the net closures of 8 stores during the first nine months of the current fiscal partially offset by a 1.2% growth in same-store sales.
Finish Line’s gross profit grew by 9.2% year over year to $70.9 million, while gross margin improved by 250 basis points (bps) to 29.5%. The growth was primarily driven by higher product margins and lower occupancy expenses. Selling, general and administrative expenses decreased by 6.9% to $70.3 million mainly due to management’s cost reduction efforts. Accordingly, Finish Line posted an operating income of $26,000, compared to an operating loss of $10.6 million in the year-ago period. During the quarter, Finish Line also received a tax benefit of $6.5 million related to termination of its merger with shoe retailer Genesco Inc. (GCO).
At the end of the quarter, Finish Line’s had cash and cash equivalents of $149.2 million, compared to $55.1 million of cash in the year-ago period. The company also took steps to optimize merchandise levels in accordance with sales trends, which led to 19.0% decline in inventories to $237.5 million from 293.2 million at the end of the year ago quarter.
Moving forward, Finish Line does not expect to open any new stores and plans to close 12 to 15 stores during the fourth quarter of the current fiscal. The Zacks Consensus Estimate, derived from 10 covering analysts, on the company’s earnings for the fiscal year ending February 2010 is currently pegged at 59 cents per share, which slipped a penny over the past month. However, the most accurate estimate is slightly bearish at 58 cents per share.
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