Comp-store sales for the locally based retailer dropped 4.8% in second quarter. However, net sales rose 1.3% to $343 million, compared with $338.6 million for the year-ago quarter.
Discussion of its currently stalled plan to acquire Nashville-based Genesco Inc. was cut off at the start of the second-quarter conference call with Wall Street analysts on Sept. 28. Alan Cohen, chairman and CEO of Finish Line, said, "We regret that Genesco has chosen to initiate litigation. We do not intend to make further comments about Genesco at this time," he added and reminded analysts of this prior to the call's question and answer period.
However, at the end of that day, Finish Line issued a statement saying it had "filed an answer, counterclaim and third-party claim for declaratory judgment in connection with the (Genesco) action pending in Chancery Court in Nashville, TN, regarding (Finish Line's) proposed acquisition of Genesco Inc." As GSR has previously reported, the Genesco lawsuit accuses Finish Line and UBS Securities of taking steps "to undermine the merger."
In the Sept. 28 statement, Finish Line says its filing "is seeking an order that Genesco provide all requested financial data and access to personnel, and that its failure to do so in a timely manner is a breach of the merger agreement." It also seeks a declaratory judgment on whether a "material adverse effect" has occurred under the agreement, "as UBS questions and Genesco denies," says the statement.
The statement continues, "UBS provided the Finish Line with a commitment letter regarding financing for its proposed acquisition of Genesco. As UBS is a necessary party whose interests are directly affected by the declaratory relief sought, UBS has been named a third-party defendant in the action." Genesco and UBS could not be reached for comment by deadline.
Meanwhile, in the conference call, Cohen said the Finish Line had made "progress on several key operating initiatives" during second quarter. Among them is an emphasis on premium products. Technical running shoes showed growth, he said, and the company is also "encouraged" by the results in basketball shoes.
The company is also re-merchandising its stores and adding emphasis to its direct-to-consumer business. "In addition, we have reduced Finish Line store inventory 8% on a per sf basis," he said. "This reduction makes room for a strong flow of new products going into the important holiday season."
FINL common stock hit a new 52-week low at the close of the Nasdaq on Sept. 28, dropping to $4.34 a share, down nearly 7.5% for the day. This compares with a 52-week high of $14.97 a share. Shares of GCO on the NYSE closed at $46.13 a share, up nearly 1.4% for the day. The 52-week high of $54.18 occurred this June 18, and the 52-week low of $34.03 a share occurred on Oct. 3, 2006.
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