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Today’s Trading Edge: Finish Line shares plummet after revenue concerns and Same-Store Sales have risen slowly

Posted by WorldWideMarkets . on Sep 25, 2016 2:58:57 PM


Finish Line Inc. (FINL) shares tumbled 5.17% on Friday to $22.75 a share after reporting second quarter earnings.  Same-Store Sales increased 5.1%, and as of August 27, 2016, consolidated merchandise inventories increased 1.6% to $372.3 million compared to $366.3 million as of August 29, 2015.

Adjusted earnings per share came in at $0.53, in line with the analyst’s survey.  Sales came in at $509.4 million, a big beat of the analysts’ expectation of $494 million, but the company warned that month-to-date performance was weaker than expected.  The company also affirmed their full year guidance. 

The retail chain’s CEO noted, “Following a solid start to the year, our comparable store sales accelerated during the second quarter,” said Sam Sato, Chief Executive Officer of Finish Line. “The combination of top-line growth and disciplined expense management allowed us to partially offset the planned gross margin pressure from our successful inventory reduction actions and deliver earnings in-line with expectations. With our enhanced supply chain now operating efficiently, our focus shifts to streamlining our organizational structure to optimize productivity, adapt more quickly to market changes and better serve our customers. I am pleased with how we continue to execute our plan for fiscal 2017 while at the same time taking the necessary steps to position the company for long-term profitable growth. 

Price action on the FINL daily chart shows that the initial drop may have formed a breakaway gap.  If momentum continues, key support may come from the once the $20.86 level.  It is around that area that price could form a bullish ABCD pattern.  Point D is targeted with the 200% Fibonacci expansion level of the B to C leg.  If valid, we could see a tentative bounce towards the $23.50 region.  If the pattern is invalidated, further pressure may target the $19.00 level.

The Trade: Buy FINL at $21.00, with a stop loss at $20.00 and a take profit at $25.00.  The Risk/Reward Ratio is 1:4

Topics: Stocks, Equities


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