Finish Line Earnings Call NUGGETS: Macy’s Deal Details, ASP Outlook

On Friday, Finish Line Inc (NASDAQ:FINL) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Macy’s Deal Details

Kate McShane – Citi: I just wondered if we can have a little bit more detail behind the Macy’s deal and how much investment will you have to make in building out these shopping shops and does that change your margin profile at all? And second to that, can you talk about the margin profile of the new business.

Glenn S. Lyon – Chairman and CEO: So, Kate, it’s very early days obviously. We are just announcing this this morning, and what I would ask for in response to that give us a little bit of time and we want to be as transparent as possible with all of you, but we’ll point to Q3, where we’ll talk more specifically about capital investments and margin profile et cetera. I would say that this is not a significant capital investment initiative. There are investments we are going to make in fixtures and build-out within the Macy’s stores, but it’s not a high capital-intensive initiative. There is a lot of sweat equity I’ll call it to go into this to make this a successful initiative and we are very much excited about doing that. We are putting together the people in place and the team in place and have been doing that for a while to support the rollout and to support the successful integration of our shops into Macy’s as well as taking over the inventory management on April 1st. So, well, give us a little bit more time to talk more specifically about capital investment and then also the margin profile going forward.

Kate McShane – Citi: This is a little bit of a nitty-gritty question, but there was one comment in the prepared comments that the remodeled stores that fit the new prototype that you are pleased with the double digit comp lift that you are seeing. Is that in addition to the comps that you saw this quarter? How should we think about that?

Glenn S. Lyon – Chairman and CEO: So, what we said was we’ve remodeled seven stores and they are up double digits. It’s very early days on many of those. The oldest of the stores that we have are the one that you saw in Indianapolis here at our Castleton store. That store is up stronger double-digits and we are seeing increases across all categories. The caveat is it’s still early days, as we said before we’re going to remodel up to 20 new stores this year and go through holiday and assess results and then we’ll talk about go-forward remodel plans as we move into next year, but to date we’re pleased with the performance of these remodeled stores.

Kate McShane – Citi: And then my final question is just on your comment with the outlook and the month-to-date comps for September, any additional insights and maybe (indiscernible) traffic in the middle of the month and why you expect a pickup later on?

Glenn S. Lyon – Chairman and CEO: This is Glenn. There is a lot of noise out in the market as I’m sure you are aware. The upcoming – I’ve heard noise about the upcoming election, back-to-school store malaise, I’ve even heard things about the iPhone 5 and how that’s impacted business. Here is my attitude; this has been 13 days of slowing down of sales. I’d call that a blip for now, not a trend, but you know as always we will be diligent in managing the non-fixed expenses in running our business and be careful that we don’t overshoot what the customer is telling us. So again, 13 days is what this is and unfortunately that’s what it is, and it’s been traffic driven. We look at our inventory, we look at our category assortment, there is nothing in particular in any part of our business that’s indicating any other change in trend other than the pure shortage of traffic, in the stores not on the website.

Steven J. Schneider – President and COO: Let me just clarify, the assumption for the back half of the year. So month-to-date store comps are flattish, call it. And in the back half of the year, our overall comp assumptions assume a slight uptick to very low single digits and that’s what’s embedded in the back half of the year and our overall comp assumption. So again that’s why we remain confident in the guidance that we put out and again as Glen said this is a two week lift and we’ll continue to watch it carefully.

Session 2:

Robby Ohmes – Bank of America Merrill Lynch: Two sort of follow-up questions. The first on the agreement with Macy’s can you talk a little bit about, how you’ll merchandise those 400 or so locations and what your access will be to products, particularly from the people like Nike, because I know that, in the past one of the advantages your stores and competitors would have had is that you are getting some of the best-selling stuff that you Macy’s and other type people can’t get. So if you could sort of elaborate on a how that will work. Then the second question is sort of a follow-up on the trend commentary. I think you said the ASP was up 10% in the quarter, what how is that playing out during the slowdown and how do you foresee ASPs playing out in your comp assumptions for the rest of the year? Thanks.

Samuel M. Sato – President, Finish Line Brand: This is Sam. I’ll address the Macy’s question. Obviously we just announced that deal today. There has been a lot of discussions with Macy’s and obviously with our internal teams and as we look to spring to roll this out the work began specific to our deeper discussions and strategic planning with each of our brand partners. Having said that, we are confident given our relationship with them that we’re going to put together a best-in-class offer for the Macy’s consumer, and as Glenn said in the prepared remarks, it’s a group of consumers we haven’t targeted in our mall stores, and we think that there’s an opportunity there for us to bring all of our key brands’ best product offer to the Macy’s consumer, and we would absolutely think that our brand partners will support us in this initiative.

Glenn S. Lyon – Chairman and CEO: With respect to ASP question, Robby, ASPs for us were up 5% in Q1 and then 10% in Q2, and that’s in part driven by price increases that we’ve been talking about for a while coming through from the brands, but also a continued discipline approach to inventory management and we are getting some benefits from the sales mix. So as we look to the back half of the year, in particular on ASPs, we think that things will certainly moderate from the trends that we saw in Q2 and our expectation is for low to mid-single-digit ASP increases in the back-half of the year, maybe a little bit better in Q3 and then a little bit lower in Q4, because that’s where we start to cycle against the price increases that we saw coming through from the brands.