Footwear and sporting goods retailer Finish Line (Nasdaq:FINL) focuses on selling a wide selection of footwear from leading retailers, including Nike (NYSE:NKE) and Under Armour (NYSE:UA). Judging by its full year results released on March 30, it has carved out a solid competitive position in mall-based locations throughout the country. Further specialization could help it out further going forward.

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Full Year Recap
Finish Line's sales increased 11.4% to $1.4 billion. For the year comparable store sales rose a solid 9.2% and online sales jumped nearly 50%. Sales growth was positive despite the total store count down to 637 stores. During the fourth quarter, Finish Line acquired rival The Running Company and its 19 locations.

Operating income grew at nearly twice the rate of the top line as it increased 22.5% to $134.3 million. Modest selling costs helped boost profitability and helped offset higher store closing costs and impairment charges to right-size the mix of stores. This more than flowed through to the bottom line as net income improved 23.1% to $84.8 million. Share buybacks boosted earnings per diluted share to $1.59 for growth of 26.2%. The company did not provide cash flow details during its earnings release.

SEE: A Breakdown Of Stock Buybacks

Outlook and Valuation
For the coming year, Finish Line currently projects earnings growth in the mid-single digits, as comparable store sales should increase at a similar pace. Analysts expect sales growth of about 5% and earnings of $1.63 per share. At the current share price just over $21 per share, the forward P/E currently stands at 11.5.

The Bottom Line
Last year, Finish Line generated free cash flow of $89.5 million that came in well ahead of earnings of $68.8 million. This worked out to free cash of approximately $1.64 per diluted share. Overall, the company is firmly profitable and looks to be capable of growing sales at a mid-single digit clip over the long haul.

The purchase of The Running Company adds a specific niche that better allows Finish Line to compete against general sporting goods retailers including Dick's Sporting Goods (NYSE:DKS), as well as closer rival Foot Locker (NYSE:FL). At a forward P/E now below 13, the stock appears to have a favorable risk-return tradeoff.

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Tickers in this Article: FINL, FL, NKE, DKS, UA

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