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Finish Line has trimmed its profit outlook for the full year amid disappointing sales volume, sending its stock plunging more than 28 percent Tuesday morning.
Just earlier this month, the CEO of rival Dick's Sporting Goods said that his sector of retail was in "panic mode." The remarks immediately sent shock waves across the broader sporting goods space, similar to what was playing out in the market Tuesday.
On Monday, Finish Line adopted a shareholder rights plan, also known as a "poison pill." The shareholder rights plan has the goal of preventing unwanted takeover advances
"The board believes that it is in the best interests of Finish Line and our shareholders to adopt a shareholder rights plan given the current market conditions and recent share accumulations," Glenn Lyon, chairman of Finish Line, said in a statement.
U.K.-based Sports Direct International, one of Finish Line's top shareholders, raised its stake in the company to 19.9 percent on June 21 from 9.2 percent on May 17, according to a regulatory filing.
Finish Line CEO Sam Sato added that the marketplace for athletic footwear remains "highly competitive and promotional," in line with what Dick's CEO, Edward Stack, said on a call with analysts and investors earlier this month.
Looking at the full year, Finish Line now expects same-store sales to fall 3 to 5 percent, compared with a prior outlook for a low, single-digit percentage gain. The company has said its adjusted per-share profit would be between 50 cents and 60 cents, down from a previous forecast of $1.12 to $1.23.
In disclosing preliminary results for its fiscal second quarter, Finish Line said sales fell 3.3 percent, to $469.4 million. Comparable sales dropped by 4.6 percent over the period.
In the wake of the news, other sporting goods retailers are taking hits on Tuesday.
Shares of Under Armour were falling around 4 percent, Nike was down more than 2 percent, and Dick's and Foot Locker both saw their stocks fall more than 1 percent. Hibbett Sports' stock was down nearly 3 percent, and Big 5 Sporting Goods was falling 3 percent by midmorning Tuesday.
Finish Line's stock regained some ground from its initial plunge and was down 18 percent to $8.52 at midmorning.
"This is no surprise, as the challenging landscape has been well-documented at this point," Jefferies analyst Randal Konik said in a note to clients about Finish Line's adjustments on Monday.
"While the magnitude of the shortfall is likely larger than many anticipated, overall, the shortfall is not surprising, as the softness in the athletic space as of late has been well-documented by retailers and brands alike, most notably at [Foot Locker], where 2Q results also significantly missed expectations."
More than anything, Konik said this news means that Nike will "remain under pressure" because its business is largely leveraged to that of Finish Line.
Meanwhile, Nike has decided to work with Amazon to sell its merchandise on the internet giant's website, in addition to its own e-commerce platform. When the deal was first announced, it had many questioning what impact the partnership would have on brick-and-mortar stores as pick-up points.
With Tuesday's declines, shares of Finish Line have fallen more than 60 percent over the past 12 months.
— Reuters contributed to this story.