The Finish Line CEO reticent on Genesco acquisition
The Finish Line, Inc. (Nasdaq: FINL) CEO Alan Cohen said nothing has changed regarding the athletic footwear retailer’s troubled acquisition of rival Genesco (NYSE: GSO) other than what has been publicly stated.
“Nothing’s changed beyond what we’ve said publicly in the press releases,” Cohen said in a morning conference call. “We are in litigation. That’s not by our choice.”
In June, Finish Line announced it was buying rival Genesco, a shoe and apparel chain operator, for $1.5 billion. Since then, Finish Line said on Monday that the deal has stalled because of Genesco's failure to provide financial details or access to the company’s financial officers. Last week, Genesco accused Finish Line of “buyer’s remorse” and filed a lawsuit to close the acquisition.
Since Genesco reported a $4.2 million second-quarter loss on Aug. 30, Wall Street analysts have criticized Finish Line’s $1.5 billion offer as overpriced. Investment bank UBS (NYSE: UBS), Finish Line’s financier, has delayed closing the deal by requesting additional information on Genesco’s financial condition.
An analyst on the call repeatedly pressed Cohen for answers regarding UBS’ financing of the Genesco acquisition, but the CEO only said that he had no comment on the matter and that litigation was in progress.
After Thursday’s closing, the shoe and apparel retailer reported a second-quarter net loss of $1.8 million, or $0.04 a share, above analyst expectations of a loss of $0.10 per share, but down 118% from net income of $9.9 million, or $0.21 per share, a year earlier. The Indianapolis-based firm reported net sales of $343 million for the 13 weeks ended Sept. 1, above views of $282.8 million and 1.3% above the $338.6 million recorded during the same period of 2006.
The Finish Line’s income was negatively impacted by a $13 million pre-tax charge related to closing 15 Paiva stores. Paiva, a store chain begun in April 2006, was a failed attempt by the company to enter the women’s-wear market.
Cohen confirmed that Under Armour, Inc. (NYSE: UA) will release cross-training sneakers during spring 2008 and that Finish Line “feels good” about prospects for apparel sales in the third and fourth quarter. He expects to see better product margins in apparel goods and to see “negative numbers disappear.”
“We’ve got a fantastic NCAA fleece program, second to none. We’ve got a very strong Under Armour program,” he said. “We’re definitely more focused; I think that has really been the problem in apparel.”
In morning trading, FINL shares are down 7.46%, or $0.35, at $4.34. Over the last 52 weeks, shares have ranged from $4.30 to $14.97.
