Finish Line, Just For Feet Fall on Price Concerns (Update1)
Bloomberg News
August 5, 1998, 1:45 p.m. PT
Finish Line, Just For Feet Fall on Price Concerns (Update1)
(Adds comments from analyst in 4th and 12th paragraphs,
comment from Finish Line executive in 9th to 11th paragraphs.
Updates stock activity.)
Indianapolis, Aug. 5 (Bloomberg) -- Shares of athletic shoe
retailers Finish Line Inc., Footstar Inc. and Just For Feet Inc.
tumbled for a second day on concerns that price cuts by industry
leader Venator Group Inc. could hurt profits from the crucial
back-to-school season.
Venator, which operates the Foot Locker and Champs Sports
stores, has stepped up sales promotions in the last four or five
days to clear out excess inventories, said analysts and
executives from other chains. That could take away sales from
other retailers or force them to cut prices.
The price cuts come at a crucial time for sneaker sellers,
who've been struggling the past year as consumers switched to
hiking boots and dressier shoes such as Hush Puppies. The back-to-
school season accounts for as much as a third of the retailers'
annual earnings.
''Finish Line is unlikely to meet sales and earnings
projections with the level of promotional activity that's now in
place,'' said analyst Maureen McGrath of Salomon Smith Barney
Inc., who rates Finish Line ''buy.''
Indianapolis-based Finish Line fell 6 1/16, or 31 percent,
to 13 7/16 in trading of 6.5 million, 14 times the three-month
daily average. The shares fell 9.8 percent yesterday.
Birmingham, Alabama-based Just For Feet fell 3 1/8, or
15 percent, to 17 5/8, after dropping 8.3 percent yesterday.
Mahwah, New Jersey-based Footstar Inc., which operates the
Footaction chain, fell 3 1/16, or 8.5 percent, to 32 15/16 after
dropping 5 percent yesterday.
New York-based Venator couldn't immediately be reached for
comment.
Markdowns
Venator warned last month that earnings for the fiscal
second-quarter ended Aug. 1 would miss estimates, blaming
markdowns on shoes and clothing and weak demand caused by Asia's
economic slowdown. It's expected to report earnings the third
week of this month.
It's too soon to tell how Venator's price cuts may affect
Finish Line's business in the current quarter, Chief Financial
Officer Steven Schneider said in an interview.
''August is a very important month for all of us because of
back to school,'' he said. ''We're still waiting to evaluate to
what degree this might affect our business.''
Schneider said Venator appears to have marked down running
shoes from Adidas-Salomon AG as much as 25 percent. It's also
taken steeper markdowns on products from Nike Inc. and Timberland
Co., he said.
''Importantly, discounting appears to be on key products,
and is not a function of clearing excess inventory in older
styles,'' analyst McGrath said.
Finish Line was expected to earn 42 cents a share in the
fiscal second quarter and 17 cents in the third quarter, the
average estimates of analysts polled by IBES International Inc.
Salomon's McGrath cut her estimates for the second quarter
to 38 cents a share from 42 cents and the third quarter to 16
cents from 17 cents.
Venator
Venator fell 1/8 to 12 15/16. Its shares are down 37 percent
this year, as it struggles with weak sales and losses.
Foot Locker's excess inventories stemmed from apparent
merchandising and purchasing mistakes, said analyst Brent Rystrom
of Piper Jaffray Inc.
Venator stocked up on brand-name men's basketball sneakers
last fall, just as consumers began to favor brown shoes such as
boots. This spring, Venator added more brown shoes, just as those
sales began to taper off, analysts said.
''It's a short-term problem and will probably last five or
six weeks,'' he said.
Adding to Venator's problems is its involvement in a bidding
war for Sports Authority Inc., the top seller of sporting goods
such as sneakers and treadmills.
Venator agreed May 7 to swap 0.8 share for each Sports
Authority share. Gart Sports Co. later made a rival $20-a-share
cash offer for a majority stake in Sports Authority.
Venator shareholders have pushed for Venator to come back
with a cash offer of its own. Investors had criticized the stock
offer because of potential dilution in their shares, pushing
instead for a cash bid.
Fort Lauderdale, Florida-based Sports Authority fell 5/16 to
10 7/8. Denver-based Gart was unchanged at 16 3/8.
--Anne Pollak in the Princeton newsroom (609) 279-4043 with
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