Piper Jaffray Throws In The Towel On 'Value Trap' FinishLine

• The share price of Finish Line Inc FINL has declined 38.44 percent in the past six months, trading almost at the 52 week low on November 17.
• Piper Jaffray’s Erinn E. Murphy has downgraded the rating on the company from Overweight to Neutral, while lowering the price target from $25 to $18.
• The downgrade follows Piper Jaffray’s proprietary athletic survey, which indicates a broad shift in consumer behavior. Murphy believes that while inexpensive, the stock is a “value trap.”

Analyst Erinn Murphy explained that Finish Line’s execution has been “faulty” and the company “continues to lag the industry in terms of procuring in-demand product.”

Piper Jaffray’s proprietary indicates that the consumer is continuing to shift to the online mode, with only one percent of athletes preferring to shop at mall-based retailers, down from 5 percent in the same period in 2014.

Although Finish Line caters more to fashion than performance consumers, here too 27 percent preferred shopping online, up from 24 percent in the same period in 2014.

Brick & mortar accounts for 70 percent of the company’s sales at present, across 620 stores, with online only accounting for 14 percent of sales.

In addition, Finish Line has indicated during the previous quarter that it intended to start rebranding its “individual store/fleet monikers to JackRabbit over the next two years, adopting the name of a NY store chain acquired back in March.”

Murphy expressed concern that rebranding might disrupt the local feel of the chain, which pure performance runner appear to favor.

The EPS estimates for Q3, FY2016 and FY2017 have been lowered from ($0.01) to ($0.04), $1.72 to $1.70 and $1.82 to $1.69, respectively.