Despite the fact that consumers have been reducing their discretionary spending in the face of uncertain economic conditions, athletic-shoe makers have seen a surge in demand for their products. Recently, footwear retailing giant Nike (NYS: NKE) saw its first-quarter revenues sprint ahead by 18% over the same quarter last year.
Finish Line (NAS: FINL) , whose largest supplier is Nike, saw its second-quarter profits lap past market estimates as it posted better-than-expected quarterly sales. This has more or less been a common trend among footwear retailers. Rival Foot Locker (NYS: FL) also posted estimate-topping numbers in its most recent quarter, helped by a surge in the sale of running shoes. Let's dive into Finish Line's quarter and see what lies ahead.
The trail ahead and a look back
Revenues for the quarter rose 10% to $331.5 million (on a year-over-year basis) helped by an incredible 11% rise in comparable-store sales. The 11% rise in same-store sales is the largest the company has seen in over a year. Helped by this, Finish Line saw its bottom line surge 24% to $20.9 million.
According to a Reuters report, Chief Financial Officer Ed Wilhelm noted that Nike, Adidas, and Reebok's lightweight products should help Finish Line expand its margins in the next quarter. Also, sales of its basketball and running shoes saw double-digit growth in the quarter and Finish Line's e-commerce business climbed by 61%. Finish Line has been focusing on improving its premium merchandise, e-commerce businesses, and their running shoes segment. This increased focus has, in part, been responsible for the rise in same-store sales and should continue to help in coming quarters.
Finish Line has also been looking to expand its business through acquisitions. It recently spent $8.5 million to acquire the assets of an 18-store chain of specialty running shops. These stores operate in eight different states and give Finish Line access to a larger market.
Though larger economic trends indicate that consumer spending is waning slightly, companies such as Nike and Finish Line have shown that the demand in the athletic sector has been rising. Whereas overall apparel sales have risen 0.2% this year, according to NPD Group data, athletic apparel sales have increased in the high single digits. To quote SportsOneSource's analyst Matt Powell, "The economy is currently in an athletic fashion cycle."
Finish Line had a good quarter and is looking to take this strong performance forward. It has been looking to expand its core business and also grow through acquisitions. It remains to be seen if it is able to deliver on these strategies. All in all, things are on the up for Finish Line. To see if Finish Line can keep the momentum going, and whether their acquisitions prove fruitful, add Finish Line to your Fool watchlist. It's free, and will give you the Fool's best news and analysis as things develop for this retailer.
At the time thisarticle was published Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above.Motley Fool newsletter services have recommended buying shares of and creating a diagonal call position in Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.