FINL: Insights From a Strengthening #2

We recently posted our Footlocker wishlist and believe the latest results from Finish Line offer some insights into what’s working and what’s not in the world of mall-based athletic footwear retailing.  While the ultimate success of Footlocker’s efforts will be determined by its own merchandising and turnaround strategy, there are interesting takeaways from FINL that should give Footlocker some things to think about it.  Finish Line has always been successful when it is selling product that consumers want (yes I know that is an obvious statement, but it’s true) and as a result, are more likely  to pay full price.  This is in contrast to Footlocker, which has historically been very promotional (BOGO’s were at one point the norm).  The key conclusion here is that product, not price, will be the most important factor in driving healthy margin expansion and sales growth in the space.  Finish Line is onto these trends and early results appear to be promising.


Some of the takeaways on product, pricing, and e-commerce from the Finish Line quarterly call:


  • Sales patterns within the quarter remained volatile, with underlying demand still not improving at a steady and predictable pace.  Customers showed up for Black Friday and other promotional events, but sustained momentum is still elusive.
  • Focus on innovative product has been successful in driving full priced sales, especially in performance dominated categories.  Running, a category where FINL has worked with vendors on developing exclusive product, invested in in-store presentation, and increased training for its associates had strong results in the quarter.  Same store sales in the running category increased in the mid-teens, with strength in both men’s and women’s.  Nike and Puma were leading running brands in the quarter.  Both are focused on lightweight shoes as part of their innovation message.  Overall, ASP’s increased 4.8%, reflecting the strength in full priced sell-throughs of performance product.
  • The toning category was again mentioned as a key highlight from a product standpoint.  As inventories in the product category began to improve towards the end of 3Q, management noted that toning became a “contributor” to 3Q results.  Both Shape-Ups and Easy Tones are driving strength in this young category.  Management expects toning to be a “meaningful” contributor to the fourth quarter.
  • The powerful combination of e-commerce and physical retailing continues to show benefits.  FINL noted that sales under the company’s “We’ve Got It” program are up 50% year to date.  This effort substantially increases conversion because it gives the customer the option of having an out-of-stock item shipped directly to their home rather than walking away completely without a sale.  We continue to hear more and more from retailers that are effectively leverage a fully integrated multi-channel strategy.
  • Weaker categories in the quarter included basketball (comped down and expected to remain under pressure) and casual athletic (i.e non-performance).
  • Kids performed above average, driven by strength in Brand Jordan, Puma, and Under Armour.
  • Apparel posted its first positive comp in 15 quarters, increasing by 5%!  The repositioning of the product offering towards a more premium product is beginning to show results.  Brand Jordan, The North Face, and Under Armour were key drivers in the quarter.

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

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more