Ahead of the Bell: Finish Line's rating cut
NEW YORK (AP) — An analyst downgraded Finish Line on Wednesday, saying that the sneaker and athletic clothing company will likely continue to lose share to rival Foot Locker.
Sam Poser of Sterne, Agee & Leach said in a client note that Foot Locker Inc. had better revenue at stores open at least a year during the first quarter than Finish Line did. Finish Line also appears to be trailing its competitor in the second quarter.
This metric is an important gauge of a retailer's health because it excludes results from stores recently opened or closed.
Poser said in a client note that much of Finish Line's same-store revenue strength came from sales in the basketball category, in particular sales of Michael Jordan products. The analyst says this makes up about 35 percent of Finish Line's business compared with 45 percent of Foot Locker's business.
Poser is also concerned about the Finish Line's investments in new store concepts, saying that the company has been overly anxious to roll out the concepts but needs to do more testing on in-store layouts to see if they are the proper format.
"We believe that Finish Line's new store ideas are great, but the apparent lack of patience by management will likely continue to result in limited to no flow-through to the bottom line even with strong same-store sales," he wrote.
Poser lowered Finish Line Inc.'s rating to "Underperform" from "Neutral" and set a $20 price target.
Finish Line shares fell 43 cents, or 1.8 percent, to $24.08 in premarket trading Wednesday. They are down 8 percent from their 52-week high of $26.16 in late March. They traded as low as $17.80 in mid-September.