Finish Line's explanation of its disappointing quarter perfectly captures the retail apocalypse (FINL)

pulse

March 24, 2017 1:09 PM

Finish Line had a hard time selling shoes during the fourth quarter, and its explanation of why is a concise summary of the retail industry's crisis.

null

The footwear retailer's shares were down 15% premarket on Friday after reporting earnings of $0.50 per share, missing the forecast for $0.70 according to Bloomberg. Sales at stores open for at least one year fell 4.5%, which was worse than analysts expected. Net sales topped expectations.

In the earnings release, CEO Sam Sato outlined problems that many traditional retailers would be able to identify with. In one sentence, consumer habits are changing and the overall retail landscape is in decline, so retailers are responding by slashing prices but that's denting their margins.

Here's Sato (emphasis added):

Finish Line found that people did not buy the same sneakers they may have wanted in the past. The growth of athleisure, and how companies from Amazon to Under Armour are trying to cash in, serves as another illustration of how companies are adapting to changing tastes. Additionally, consumers are doing much more shopping online and less at physical stores.

Consumers are doing much more of their shopping online and less at malls, hurting brands that have traditionally relied on foot traffic. The discount-shoe retailer Payless had looked to close 1,000 stores, and could file for bankruptcy as soon as next week, Bloomberg reported.

Analysts have warned of a retail apocalypse in the US, where The Limited,150 namesake stores and Kmart stores in 2017.

In response to the slowdown, Finish Line used deep discounts to attract customers, which Sato describes as being "aggressive on pricing." While that drove more sales, it hurt profit margins, like many of its peers.

pulse