FINL slumped on Friday following an analyst downgrade. This comes less than two months after the company reported its second-quarter results, which featured a comparable-store sales decline and slashed full-year earnings guidance. The reason for the downgrade was the belief that the company's promotional activity is unsustainable, which will hurt not only margins but also relationships with major brands. Gross margin was This suggests that Finish Line is engaging in significant discounting.
Competition from online retailers and a shift toward direct-to-consumer for major brands like Nike have put Finish Line in a tough spot. Profits are in free fall as the company ramps up its promotional activity, and there was no sign in the second-quarter report that any aspect of the business is improving. If Finish Line can't stabilize its business in the coming quarters, the stock could be headed even lower.
Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nike. The Motley Fool has a disclosure policy. Tim writes about technology and consumer goods stocks for The Motley Fool.
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