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Finish Line Slashes Projections in Q2; Adopts ‘Poison Pill’

The Finish Line took measures using a new Shareholder Rights plan to ensure a possible takeover does not happen. On Tuesday, the company lowered its guidance for 2018 and said that it would earn its smallest profit since 2009 this year.

The Shareholder Rights plan is being instated in an effort to stop a potential hostile takeover. The plan gives a dividend of one preferred stock purchase right (a ‘Right’) for each outstanding share of common stock of the company. The dividend is payable to shareholders of record on Sept. 11 of this year. Each Right initially gives the registered holder the ability to purchase from the Finish Line one ten-thousandth of a share of a newly-created series of the company’s preferred stock at $26 per Right.

Amidst fear of a hostile takeover, the company adjusts its outlook after an unfortunate second quarter. During the period, consolidated net sales decreased 3.3%, down to $469.4 million, compared with the same period last year’s 4.6% decrease in comparable sales. Due to the decline in sales and pressure on gross margin from growing markdowns, the company now predicts second quarter earnings per share (EPS) between $0.08 to $0.12.

“The marketplace for athletic footwear became much more promotional as our second quarter progressed resulting in challenging sales and gross margin trends,” said Finish Line CEO Sam Sato. “Despite these headwinds, we remained disciplined in managing our inventories and expect to end the quarter with inventory levels down approximately 7 to 8 percent compared with a year ago.”

With year-to-date results, Finish Line expects the challenging times to continue through the remainder of FY2018, now expecting comparable sales to decrease 3 to 5 percent, compared to previous guidance of an increase in the low-single digit range.

Adjusted EPS are now expected to be in the range of $0.50 to $0.60 for the FY2018, versus the previous guidance range of $1.12 to $1.23.

“In light of our disappointing second quarter results and revised projections for fiscal 2018, we will remain very disciplined in managing our expenses and inventories throughout the remainder of the year,” said Sato. “We continue to focus on building our omnichannel capabilities to strengthen our customer connections, improve our service levels and further capitalize on the shift toward digital commerce. We are also making good progress rightsizing the business to better compete in the current environment.”

The brand will release full second quarter 2018 results Sept. 22.