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The athletic shoes retailer eyes $350 million from additional sales in an exclusive deal.
Looking to run with a higher profile and boost sagging financial numbers, The Finish Line Inc. has reached an exclusive agreement with department store chain Macy's Inc. to sell its athletic shoes in Finish Line-branded shops within more than 450 Macy's stores, the two retailers announced today. With a separate pending agreement to sell its products on Macys.com, Finish Line says it expects its multichannel venture with Macy's to eventually produce additional annual sales ranging from $250 million to $350 million.
The Finish Line, No. 151 in the Internet Retailer Top 500, says the venture will help it reach a broader range of shoppers—notably women who shop for families as well as for themselves—while also benefitting from Macy's' expertise in selling to consumers across multiple retailing channels. Finish Line’s traditional core customer base is males 18 to 29 years old, the retailer says.
“Macy's large and profitable store portfolio, its customer base that is concentrated in a demographic that Finish Line has not penetrated to date, and, most importantly, its customer-centric philosophy and omni-channel focus make them an ideal partner for us to broaden our reach beyond our bricks-and-mortar stores and our web site,” says Finish Line chairman and CEO Glenn Lyon.
Macy's, No. 14 in the Internet Retailer Top 500, reported net sales of $6.12 billion for the second quarter ended July 28, up 3.0% from $5.94 billion a year earlier, as net income rose 15.8% to $279.0 million from $241.0 million. The retailer says its Q2 Internet sales rose 36.1% year over year, though it doesn't break out dollar figures for web and total sales. Comparable-store sales rose 3.0%.
By comparison, financially struggling Finish Line reported net sales of $319.05 million for its first fiscal quarter ended June 2, up 6.5% from $299.47 million a year earlier. But that rise wasn’t enough to prevent a 25.2% drop in net income to $12.3 million from $16.4 million a year earlier. Finish Line attributes the decline in net income to lower profit margins, increased costs of operating stores and the company’s ongoing investment in building out its retail strategy designed to increase sales across multiple online and offline channels.
In its deal with Macy's, Finish Line will keep all revenue from net sales and profits compiled through Macy's stores and Macys.com after paying Macy's a licensing fee. Additional terms were not disclosed.
Finish Line and Macy's expect to roll out the Finish Line-branded shops between the spring of 2013 and the fall of 2014. Finish Line will staff and manage those branded shops. In addition, Finish Line, which will become Macy's’ sole supplier of athletic footwear, will also manage the athletic footwear inventory and assortments in another 225 Macy's stores that sell athletic footwear without staffing a branded Finish Line shop. Macy's operates a total of about 850 stores, including about 40 under the Bloomingdale’s brand.
As for the plan to sell Finish Line’s products on Macys.com, Finish Line will operate a designated shopping area on Macys.com similar to one operated now by Sunglass Hut for sunglasses, a Finish Line spokeswoman says. The Sunglass Hut shop is accessed by clicking the “Handbags & Accessories” link in the Macys.com navigation bar, then clicking the Sunglass Hut link under the Shops category. Sunglass Hut is operated by Luxottica Group S.p.A., No. 145 in the Internet Retailer Topo 500.
Finish Line will use its own I.T. staff will build the network connections required to transfer product information from Finish Line’s databases to appear on Macys.com, the spokeswoman adds.
The venture will involve only stores operating under the Macy's brand and Macys.com, not Bloomingdale’s, the Macy's spokesman says.