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Strengthening customer engagement is one of the five strategic pillars for The Finish Line. As 2016 gets underway, the company has made significant strides in this key area, along with enhancing its Winners Circle loyalty program.
“We are increasing our marketing investment to aggressively build brand awareness and drive more traffic to our stores and digital sites,” The Finish Line CEO Glenn Lyon said during the Jan. 7 fiscal third-quarter conference call, according to Seeking Alpha. “We recently launched our largest brand campaign in the company’s history across our digital network including video and page social media platforms. The return on this significant brand spend has been terrific with the new campaign on pace to drive over 1 million social media impressions. Based on these results, we see opportunity for further increases in our social media followers, likes, views and shares, all helping to drive brand awareness, customer engagement, and sales growth.”
What’s more, Lyon pointed to the huge impact of the company’s Winners Circle loyalty program.
“Along with our brand marketing, we are continuing to enhance our customer loyalty program, the Winners Circle,” Lyon explained. “We are utilizing enhanced CRM and analytical capabilities to maximize the potential of our 10 million active members. From a sales perspective on average, our Winners Circle members spend 21% more per transaction than non-loyalty members, and we see this program as a great way to increase both brand awareness and sales throughout our chain. We plan to selectively open new stores in the best-of-class malls and invest in our top stores to strengthen customer experience. We absolutely recognize the value of our stores and brand awareness, product accessibility and customer engagement.”
The third quarter, however, brought a major supply chain challenge for The Finish Line.
“Our performance for the quarter was not what anyone, including our team, had expected,” Lyon explained. “The results we reported are not acceptable and I along with Sam, Ed, and the entire senior management team are working swiftly to ensure the issues are addressed and that we get back on track to generating the benefits we continue to believe will be achieved through our supply chain system enhancements. As you know, we went live with our new warehouse and order management system in September to drive efficiencies in our direct to consumer business, through improved order routing and fulfillment, as well as better inventory management and improved in stock levels at retail. However, in October, we began experiencing issues with the flow of fresh inventory into our stores, as well as significantly reduced ability to fulfill online orders as the new system was unable to process freight at the volumes necessary to support our sales plans.”
For the quarter, outbound shipments fell 25% compared to the same period a year ago.
“As a result, inventory of the newest goods in our stores and available for sale online was below last year’s third quarter by an average of $41 million or 14%,” Lyon noted. “This lack of inventory had a significant impact on our ability to convert traffic into sales. Third-quarter traffic was flat compared to last year, which was consistent with first half trends but conversions dropped off in Q3 as we didn’t have the fresh receipts on shelves that our customers were looking for. At the same time, digital sales were flat after being up 23% in the first half of the year due to a lack of new products available on our site. In addition, we experienced processing issues for orders that we did receive which led to cancellation rates that were 50% higher than normal.”
Lyon estimated that the total impact to the company’s top line was approximately $32 million in lost sales.
“We responded quickly to the supply chain disruption, increasing technical and operational resources, including third-party experts to correct the issues with our system and improve our operating capability,” he said. “We will continue to invest in additional resources as required until the supply chain system is stable and operating effectively.”
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