Bearish Bets on Finish Line Ahead of Earnings

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Shares of Finish Line Inc (NASDAQ: FINL) took a hit today, dropping as low as 6% after a Goldman Sachs note mentioning that Nike Inc (NYSE: NKE) might be closing in a deal with Amazon.com Inc (NASDAQ: AMZN). Later in the afternoon it was confirmed that Nike will some products directly to Amazon.com, stating it can no longer afford to neglect the online retail giant.

Check out FINL on the daily chart below.

Finish Line

Nike Potentially Selling Directly Through Amazon

Amazon.com owns shoe retailer Zappos.com and speculation is that Nike would sell directly through them. This sent shares of Dicks Sporting Goods, Foot Locker and The Finish Line lower.

Currently, Nike is only available through 3rd party sellers on Amazon.com. Goldman believes that the move will give Nike greater exposure and brand recognition amongst younger shoppers.

Goldman believes this was a possibility based on channel checks the company made.

That said, option traders were in full force, placing bearish bets on the Finish Line causing option implied volatility to spike.

Some notable orders include:

  • 250 FINL November $14 puts for $2.30
  • 154 FINL July $12 puts for $0.55

Finish Line Comments About Nike

In its latest earnings transcript dated 3/24/17 The Finish Line had this to say about Nike:

“With Nike, we’ve got a number of exciting initiatives planned beginning with this month’s celebration of Air Max when we have exciting consumer experiences planned leading to this week’s launch of the highly anticipated VaporMax.

We believe that this game-changing shoe will be another ignition point for the Max Air franchise and will lead to exciting new innovation in the future. We will utilize exclusive assets in launching the platform during Air Max Day and will elevate the customer experience across every touch point introducing the new VaporMax to our customer in a way like never before.”

In addition, EVP & CEO, Ed Wilhelm had this to say about the company and its relationship with Nike:

“Our stores are appropriately sized and I don’t know if you’ve had a chance to see one of our new design stores yet, but the footage that we use in the new store design is absolutely appropriate to do the merchandise storytelling that we want to do, particularly around leading brands, leading product from the brands and that’s a head-to-toe storytelling with the greatest sneakers that are available from adidas, Nike, Puma, Under Armour, etc. and then head-to-toe apparel around those sneakers. So we are appropriately sized and not a problem in terms of going forward.”

Source: BamSEC

This could be a major blow for the likes of the The Finish Line and other shoe retailers.

That said, The Finish Line is set to announce earnings on June 23, 2017.

Shares of the stock hit a 52-week low today and option volume was about 5 times above average.

FINL Statistics

The July 21 FINL $12 straddle is implying a 14.1% move.

Over the last 8 quarters the average move in FINL earnings has been 11.3%

       Date              Change

  • 03/24/17          (-19.5%)
  • 12/21/16          (-8.7%)
  • 09/23/16          (-5.2%)
  • 06/24/16          (21.8%)
  • 03/24/16          (0.7%)
  • 01/07/16          (-10.1%)
  • 09/25/15          (-19.6%)
  • 06/26/15          (4.6%)

The Finish Line will be releasing earnings before the market open on Friday, June 23. Shares closed at $12.50 per share.

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