FINL: A Beat Will Need to Come from Costs

FINL: A Beat Will Need to Come from Costs

 

Our analysis suggests that in order for FINL to beat numbers like so many others have in recent weeks, it’s going to have to come from somewhere other than the top line.  

 

Lining up footwear and apparel POS data with FINL comps suggests that there is little upside to be gained on the top line for the quarter about to be reported. This analysis has served us well, as FINL comp trends have an 85% correlation with a blended combination of NPD footwear data (85% of the blended data) and Sportscan sports apparel figures (15% of the blend) over the last year and a half.  Tracking the comp trends to the data blend, implied Q3 10 comps range between -1% and -3%, which compares to the consensus at -0.8%. 

 

On a positive note, the first two weeks of the quarter have definitely stepped up, and appear to be trending +mid-single.  But keep in mind that FINL noted on the Q2 call that comps were up 7% in September, which clearly did not hold.  

 

FINL: A Beat Will Need to Come from Costs - FINL Chart 

  

One of the most notable points is that FINL’s sales/inventory spread trajectory is sitting in positive territory for the 6th quarter in a row. Inventories are lean…very lean. In order to prevent erosion, FINL really needs to see an acceleration in sales in conjunction with more commitment to actually beefing up inventory.

 

We’re modeling a 5.6% sales decline, a -4% EBIT margin, and a loss of $0.11 per share.  Could FINL print the Street’s -$0.09? Yes, and they could even beat it. But it will need to come from SG&A – and the cuts there are finite.

 

We’re not uber-bears on FINL by any means… In fact, this is a space we like a lot headed into 2010. But before ’10, we need to get past this quarter.

 

Note: FINL reports earnings after the close on 12/22 with the call on 12/23 before the open

 

FINL: A Beat Will Need to Come from Costs - FINL SIGMA


SECTOR SPOTLIGHT | Live Q&A with Healthcare Analyst Tom Tobin Today at 2:30PM ET

Join us for this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more