We’re in a moment when women are wearing yoga pants to the office, men are shaking up their casual uniforms with jogger pants, and style snobs are clomping around Fashion Week not in high heels, but in sneakers. Meanwhile, performance apparel brands such as Nike and Under Armour have been delivering explosive sales growth.
So if athletic apparel is so hot, why has Finish Line announced this week that it is closing 150 of its 617 stores?
For starters, the move is a reflection of how much regional malls are struggling and the pace at which more shoppers shift to buying online. In a Thursday conference call with investors, chief financial officer Edward Wilhelm said the 150 stores that Finish Line is closing only generate about $1 million each in annual sales. That is less than half the company average.
And so Finish Line believes it can improve its profitability if it trims the fat in its store fleet and instead focuses on the most lucrative locations.
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Many of its retail industry counterparts are doing the same calculus: Macy’s is set to close 36 stores this year, while Gap is the process of closing about one-quarter of its North American fleet. Pier 1 Imports plans to shutter 100 storesover three years.
Finish Line’s relatively weak position also reflects some merchandising misfires. On a Thursday call with investors, company president Samuel Sato said his chain simply hasn’t carried enough of the most-coveted and best-selling items in the generally hot sneaker category. He also said that sometimes Finish Line hasn’t secured enough exclusive versions of those products to distinguish itself from rivals.
Indeed, Finish Line is trying to find its niche in a category that has become incredibly crowded. Its closest mall cousin, Foot Locker, has found its footing by diversifying a bit away from basketball sneakers and clothing into running gear and more casual athletic-inspired goods. And some of the brands that are most key to their assortment, Nike and Under Armour, are more aggressively pushing into so-called “direct-to-consumer” sales, encouraging shoppers to buy from their own websites and stores instead of just finding them in chains.
The competition is coming from less obvious places, too: Lululemon, Athleta and Chelsea Collective — a new, boutique-inspired chain owned by Dick’s Sporting Goods — have been gunning for shoppers who want their athletic gear to come with a heavy note of style. Old Navy and Forever 21 have amped up their activewear offering with trendy printed workout leggings and cut-out tanks, while Target’s enhanced focus on style and wellness have led it to push offerings such as an apparel collaboration with upscale exercise chain SoulCycle.
Finish Line announced Thursday that Sato, the company president, wouldtake over the chief executive role from Glenn Lyon, a shake-up that suggests the board of directors thinks the chain needs some fresh thinking about its future.
The announcement came as Finish Line reported bleak quarterly earnings results, in which sales plunging 5.8 percent at stores open more than a year. The chain chalked up much of that weakness to some major problems in its supply chain as it implemented a new system for managing inventory.
“In October, we began experiencing issues flowing fresh inventory into our stores as well as fulfilling online orders as the new system was unable to process freight at volumes necessary to support our sales plans,” Lyon said in a press release.
The company estimates those snafus added up to $32 million in lost sales during the quarter.
Date: January 8 , 2016