During the company's third quarter earnings call Thursday, Chief Executive Officer Alan H. Cohen expressed his disappointment in the results. However, he reassured investors that the company was reviewing SGA expenses for the future. Cohen said the biggest gains during the quarter were made in men's and children's athletics, while women's footwear sales declined.
Despite the drop in income for the quarter, the company remains committed to moving forth with its recently announced concept store, Paiva. The new store will target 25- to 40-year-old active women who exercise frequently and engage in multiple athletic activities.
During the call, Cohen was asked why the company would choose to launch a women's chain at a time when that segment was experiencing such poor results. Cohen responded that Paiva will be targeting an entirely different demographic than the Finish Line consumer. Cohen also reminded the caller that while Finish Line stores offer 70% of footwear merchandise and 30% athletic wear, Paiva stores will have a merchandise assortment that includes 70% athletic wear and 30% footwear.
"We did a lot of market studies, looking at the marketplace and talking to customers and vendors," Cohen said. "This customer is not being served the way she needs to be served in the marketplace. Vendors believe they have a product that is not being marketed to or properly displayed for this customer. We think this will be very well-received."
Cohen added that the company also received positive results in Internet-based sales, which were up 35%. Year-to-date net income rang in at $32.5 million, or 65 cents per diluted share—a 2% decrease from last year's net income of $33.1 million or 67 cents per diluted share. Consolidated net sales increased 13% to $906.8 million YTD compared to $805.4 million last year. Year-to-date comparable store net sales increased 1% on top of a 9% increase reported for YTD last year.
The company operated 658 Finish Line stores at the end of the quarter, an increase of 11% compared to the 592 stores operated a year ago. During the quarter, the company opened 20 new Finish Line stores, remodeled six existing stores and closed one store with retail square footage increasing 9% to 3.7 million sf.
The company opened 11 new Man Alive stores during the quarter and plans to open an additional two stores during its fourth quarter. At the end of the third quarter, Man Alive operated 49 stores totaling 149,000 sf. In 2006, the company plans to open 45 to 50 Finish Line stores, approximately 20 Man Alive stores and 15 Paiva stores.
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