Finish Line Fixes Supply Chain Woes, Sees Sales Increase

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Finish Line Fixes Supply Chain Woes, Sees Sales Increase

By Tim Denman - 10/04/2016
Last year some well documented supply chain miscues trimmed over $30 million in sales from The Finish Lines' bottom line, and left the retailer with unsold inventory in their DCs and disappointed customers in their stores.

The retailer moved quickly to address the issue, investing in both third-party resources and technical firepower to ensure product was where it needed to be, when it needed to be. Thanks to the retailer's willingness to openly address its supply chain shortfall, The Finish Line has its fulfillment network humming at unheard of levels.

"When I assumed the role of CEO in February, our number one priority in the near-term was addressing the supply chain issues that plagued our performance late last year and during the early part of fiscal ‘17," said CEO Sam Sato in a recent earnings call with analysts. "We are pleased to report that we are now at and in most cases above historic levels on all key metrics such as direct to consumer fulfillment rates, speed of delivery and cancellations. Our focus remains on driving efficiencies from end-to-end in our supply chain that will benefit the company and our customers in the near and long-term."

Beyond the obvious ramification of decreased sales, the supply chain issues left The Finish Line with a significant increase in unsold merchandise in its DCs and warehouses. At the end of Q1 2017 (June 2016) the retailer's inventories were up 9%, prompting aggressive markdowns to clean out the inventory backlog.

"We knew we had work to do to work our inventories down in the second quarter and we aggressively did that," said CFO Ed Wilhelm. "We were aggressive and taking markdowns to work down the inventories and to clean them up. But I view that as a one-time kind of second quarter event, because we are now very well-positioned going into the fall and holiday seasons with our inventories both from a quantity standpoint, as well as from a quality and aging standpoint."

With its supply chain and inventory back on track The Finish Line is now free to focus on what its CEO has dubbed one of the four key priorities of his management agenda: strengthening engagement with the customer. Building shopper engagement is focused on three important areas: effective merchandising, store refreshes, and digital commerce upgrades.

In the merchandising arena the brand is committed to pinpointing and delivering "on-trend assortments our customers are looking for and effectively communicating our premium merchandise positioning to drive higher traffic and conversions both in-stores and online," Sato said.

To highlight its new merchandise and position itself as a hip, in-the-now brand, The Finish Line is investing in a new store format designed to drive higher traffic and conversion in-store. The store refresh will debut at 15 locations over the next three months, including eight in the Chicago area, before the retailer embarks on a wider-scale rollout. "We remain on-schedule to update approximately 50 stores with the new design this year and a significant portion of the fleet over the next three years," Sato said. "At the same time, we continue to execute our store optimization strategy with the goal of having a smaller, more profitable brick-and-mortar footprint."

In addition to investing in its physical presence, the retailer has recently upgraded its digital capabilities with an enhanced e-commerce engine that has significantly improved the brand's website capabilities in terms of speed, stability and functionality.

"Consumers now enjoy faster site navigation and a quicker checkout process," said Sato. "We are confident that the better overall experience will yield increased conversion rates across our digital channel led by our MobileFirst strategy. Prior to the platform migration, we were already experiencing robust gains in our digital business driven by mobile."