Finish Line: Strong Retailer, But Guilty by Association
I’m admittedly torn here. In my recent Motley Fool article I presented a relatively bullish case for Finish Line (FINL). The specialty retailer isn’t exactly on fire. In fact they lost money for their Q3 (ending on November 30). Sales were lower too, though that’s par for the course among retailers. Yet, I had to like my odds with Finish Line for a modest reason… they’ve spent the better part of the last twelve months doing something to make sure that the recession didn’t destroy them - something apparently no other retailer did. So, my take may be a ’survivor’ story.
Nevertheless, it’s a good survivor story. The company is sitting on $50 million in cash, and they’re cutting costs left and right to protect the profits they’re reaping right now. And, it seems to be working.
Just as important to investors, the stock isn’t getting shalacked right now. That’s a decent indication that the market ‘gets it’ … that FINL should pay off a year or two from now.
In the meantime (I had no idea at the time I submitted the article to the Fool), the company declared a three cent dividend, or about 0.5% of the share’s value. They can afford it, though I don’t quite know why they’d bother. On the other hand, that seemed to be enough to help FINL shares stave off a very nasty day for the market. So, maybe that the intent. If so, a brilliant move.
Bigger picture, I think the company’s cash balance and intelligent (not debilitating) cost cuts will bear fruit later…. much later, but will bear fruit all the same. The editor at the Motley Fool toned down my excitement a little bit, which is fine, but the message is still the same.
My only worry is that Finish Line, being a retailer, might get lumped in with the majority of retailers and be sent lower anyway. You really can’t fight the tide when it’s this strong. Too bad, though it may mean an even better value when the market’s destruction is all done.
The real upside for Finish Line and its investors (and I admit it’s a tad harsh) is that they’ll survive the recession while some of their competitors won’t. Once the economy does regroup, the company can capture more market share thanks to less competition. I didn’t want to say that in the original article, but I don’t mind saying it here.
Anyway, here’s the article at the Motley Fool. I stand by it.
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
Comments
No comments yet.
Leave a comment