NEW YORK (TheStreet) -- After a challenging 2014, Finish Line (FINL) is hoping that a pipeline of more tried-and-true basketball and running sneakers, as well as enhanced assortments at its shops inside Macy's (M) - Get Report stores, will translate into a winning 2015.
Some early sighns have emerged that Finish Line could burst through the proverbial finish line this year rather than end with a whimper. On Friday, Finish Line, which has about 1,030 locations mostly in the U.S., reported better-than-expected fourth-quarter earnings of 88 cents a share. Consensus estimates called for EPS of 84 cents. Same-store sales rose 2.6%, modestly below estimates for a 3.1% increase, with the weaker number in large part due to an 8.7% sales drop in February because of inclement weather.
On the other hand, same-store sales increased 6.3% in December and 10.2% in January on the back of gains in women's and kids footwear and licensed apparel. Sales of men's footwear fell by a low-single digit percentage.
Sales of running sneakers, which represent about 40% of Finish Line's business, increased by a low single-digit percentage, led by interest in Nike's Air Max and Roshe styles. But Under Armour (UA) - Get Report continued to make inroads into Nike's dominance in running footwear, as Finish Line highlighted strong sales of Under Armour's Scorpio and Speedform running sneakers.
Basketball sneaker sales remained challenged as Finish Line cleared through slow-moving inventory that plagued performance for much of the year, with sales falling by a low single-digit percentage.
To build on its wins from the fourth quarter, Finish Line has to deliver more products that its consumers want. That was a challenge a year ago, as Finish Line had its highest traffic levels ever but failed to convert those visitors into quality sales. Stronger product pipelines from Nike, Under Armour, Adidas (ADDYY) and Puma should stoke Finish Line's desire to not have another disappointing year.
"There are some products coming to market from Under Armour, Adidas and Puma that are resonating today," said Finish Line CEO Glenn Lyon in an interview. "There is a lot going on with these brands that give us a cause for optimism." Lyons said the styles it's selling today are more known quantities to Finish Line.
But not all the financial heavy lifting for Finish Line this year will occur from inside its stand-alone stores. Finish Line now has 400 shops inside Macy's stores in a partnership struck in 2011. The business with Macy's brought in $200 million in sales last year, and executives expect it to generate between $240 million to $250 million in 2015. Reaching that loftier sales number will require more options for men, women and kids and a focus on omni-channel retailing, which is an industry buzzword for making product inventory in stores available to mobile shoppers.
Currently, Finish Line inventory found in Macy's store shops is also available on Macy's Web site, reducing the chance consumers will be disappointed by an out-of-stock message. Finish Line will be enhancing its presentation at many Macy's shops this year, placing extra attention on women and kids. "Clearly in the Macy's world, female customers are much stronger, much more leading-edge consumers, same for kids," Lyons said.
Finish Line is going head to head with mall rival Foot Locker (FL) - Get Report to cater to a growing audience for retro basketball sneakers, street apparel and running. Its opponent is hardly sitting idle as Finish Line executes its turnaround plan. Foot Locker is aggressively remodeling its Foot Locker, Champs and Footaction stores, and adding shops inside them from Puma, Nike and Adidas.
"You will see performance zones (and) more emphasis on ladies products," said Foot Locker CEO Dick Johnson at the company's investor day held on Mar. 16.
For its part, Finish Line is preparing to up its remodeling game. "Now I think we are ready to do a little bit more than subtle changes to in store design and how product is presented," Lyons said. The company will spend the year prototyping some freshly updated stores before committing to a larger remodeling campaign in 2016 and beyond.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.