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Finish Line (NASDAQ:FINL)

Q1 2014 Earnings Call

June 28, 2013 8:30 am ET

Executives

Edward W. Wilhelm - Chief Financial Officer and Executive Vice President

Glenn S. Lyon - Chairman, Chief Executive Officer and Member of Strategy Committee

Samuel M. Sato - President of Finish Line Brand and Member of Strategy Committee

Steven J. Schneider - President and Chief Operating Officer

Analysts

Kate McShane - Citigroup Inc, Research Division

Robert F. Ohmes - BofA Merrill Lynch, Research Division

Taposh Bari - Goldman Sachs Group Inc., Research Division

Bernard Sosnick - Gilford Securities Inc., Research Division

Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division

Matthew McClintock - Barclays Capital, Research Division

Eric B. Tracy - Janney Montgomery Scott LLC, Research Division

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Seth Sigman - Crédit Suisse AG, Research Division

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Paul Trussell - Deutsche Bank AG, Research Division

Camilo R. Lyon - Canaccord Genuity, Research Division

Operator

Good morning, ladies and gentlemen. My name is Martina, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Finish Line First Quarter Fiscal 2014 Earnings Conference Call. [Operator Instructions] At this time, I would like to introduce the host of today's call, Finish Line Chief Financial Officer, Ed Wilhelm. Sir, you may begin.

Edward W. Wilhelm

Good morning, everyone. Thank you for joining us. On the call with me today is our Chairman and CEO, Glenn Lyon. In addition, Sam Sato and Steve Schneider are with us for the question-and-answer portion of our call.

Before I get started, I need to remind you that this call may include forward-looking statements involving risks, management assumptions and uncertainties that could cause actual results to differ materially from the statements expressed or implied. Such risks and uncertainties include, but are not limited to, product demand and market acceptance risks, the effects of economic conditions, the effects of competitive products and pricing, the availability of products, management of growth and other risks detailed in our news release and SEC filings.

The forward-looking statements included in this call are made only as of this date of this report and the company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

Now, I'll turn the discussion over to Glenn.

Glenn S. Lyon

Thanks, Ed, and welcome to everyone joining us this morning. Fiscal 2014 is off to a solid start. We are pleased with our first quarter results, which were driven by a sequential improvement in running trends and the ongoing strength of basketball. While we did experience some sales volatility month-to-month, comps did increase 2.4% for the quarter on top of an 8% increase a year ago. The low-digit comp gain, combined with disciplined expense management, resulted in adjusted earnings per share of $0.20. For the quarter, store traffic improved to positive low single-digits while digital traffic remained robust, up 35% over last year, with mobile accounting for 1/3 of that increase. Technology absolutely continues to reshape consumer traffic patterns. As you have heard me say before, our core customer is a digital native. We see, on a daily basis, evidence that this customer expects a shopping experience that is seamless across brick-and-mortar and digital channels. We also see that the lines of tradition -- that traditionally define these channels are increasingly blurring. We are laser-focused on meeting the needs of our customer. We remain emboldened in our endeavor to enhance the customer experience and create an omni-channel business that fully integrates our stores, our website, the social communities and mobile platform to maximize our sales opportunities and drive improved gross profit dollars per transaction.

In terms of category performance, running comps were down low single-digits. These results were an improvement from the trends we experienced in the back half of last year, as new products, primarily from Nike and Under Armour, generated renewed excitement in the marketplace. Running trends improved through Q1, with April and May posting positive comps. Nike's Flyknit Lunar 1, updated versions of Free and Air Max, along with the introduction of Under Armour Spine, have been well received by our customers. Brooks, Mizuno and ASICS continue to perform very nicely across both men's and women's. As I mentioned at the start of the call, basketball drove our top line performance with comp sales up 21%. From a brand perspective, results were strong across the board led by Jordan, Nike signature products from LeBron and Kevin Durant, as well as retro styles from Reebok, Adidas and Fila. The strength of basketball contributed to a mid single-digit comp improvement in men's. Meanwhile, women's, which obviously doesn't benefit from the current strength of basketball, and which has been impacted by the slow start to the sandal season, was down high singles.

Our kids business outpaced our overall results with Nike, Brand Jordan, Adidas, New Balance and Under Armour, together, driving a low-teens increase in the quarter.

Finally, softgoods had a low double-digit decline. Gains in Nike and Brand Jordan apparel were offset by declines in our other branded apparel and accessories offerings. Softgoods represented 10% of our total Finish Line business this quarter, and we do see this as an opportunity for both sales and margin improvement going forward. We are focused on some key enhancements to our offering for the back-to-school season. These will include: a new apparel program from our leading brand that ties more closely to key footwear introductions; an NCAA T-shirt and shorts program, which has seen strong customer response in a test mode; and an improved accessory offering, especially in backpacks, and an expanded assortment of Elite Socks.

Now I want to focus on the opportunities we are creating through our ongoing transformation into a leading, multi-divisional omni-channel retailer. We remain committed to building a platform for sustainable growth for the Finish Line enterprise. In addition to our core Finish Line business, both the Macy's partnership and the Running Specialty Group, will be important contributors to our long-term growth. I'll provide you with an update on the progress we have made with each of these initiatives before I hand the call back to Ed.

First on Macy's. We went live with Macy's during the first quarter, both in stores and online, and are very pleased with the results. With 60 Finish Line branded shops now open, including 11 that opened this week, there have been firsthand learnings about what works from a merchandising standpoint as well as from a branded shop and operational standpoint. This effort is being led by Mike Marchetti, Executive Vice President and General Manager for Finish Line Macy's stores. Mike and his team are working closely with Macy's to take customer learnings and reflect them in the Finish Line assortment and service model to deliver a tailored offering to that Macy's customer. We have seen strong results for both the men's and the women's businesses at Macy's, with women's representing over half the mix. This helps validate what we view as one of the most compelling attributes of this partnership, which is access to the predominantly female customer at Macy's, a customer who has not traditionally shopped our Finish Line stores. We were excited to see the Macy's customer respond to our premium offering from a broad range of brands, including Nike, New Balance, Puma, Converse and Skechers. These branded shops pull together a tailored assortment under the Finish Line banner, with dedicated Finish Line employees delivering a premium service experience to the customer and the customers responded. We have branded shops planned for 180 Macy's stores this fiscal year and are well-positioned to deliver on that goal. The Macy's digital business, which launched in May, is off to a good start as well and remains a great opportunity as we continue to enhance our assortment there. We are collaborating with Macy's to leverage their marketing expertise and introduce Finish Line and our premium athletic footwear products to their customer. These efforts are just getting underway. Additionally, we are planning specific programs in 3 key markets for back-to-school.

Bottom line, we're off to a really good start with our Macy's initiative. Mike and his team, along with their counterparts at Macy's, have done a tremendous job executing the launch of this great partnership, which essentially doubled our overall store count on day 1. Their Herculean effort over the past year has put us on the right path, right out of the gate, to achieve the FY '14 and the long-term goals we've established for this business.

Second, on the Running Specialty Group. We made great progress this quarter in our quest to build the Running Specialty Group into a leading national specialty running retailer. Our growth strategy is balanced between organic growth and acquisitions of leading operators in this space. During the first quarter, we grew the number of stores at Running Specialty Group by 11. Two of these were new openings and the remaining 9 stores were acquisitions, including the 6-door Blue Mile running chain right here in our hometown of Indianapolis. We also acquired the Boulder Running Company, an iconic 20-year-old chain, that is considered one of the top specialty running operations in the country. We are pleased with our partnership with Gart Capital and the momentum we are seeing in the Specialty Running business, both in terms of acquisition and greenfield opportunities. We have a strong pipeline and are actively engaged in several ongoing discussions with potential acquisition targets. We're well on our way towards our goal of adding 30 new stores through acquisitions and organic openings this fiscal year.

Third, on our core systems replacement. Our multi-year effort to replace our core systems, that will ultimately enable our omni-channel strategy, is on plan. Again, these new systems will allow us to one, improve our inventory management; two, upgrade our merchandising capabilities; three, increase our fulfillment efficiencies; four, support additions to our core business by providing a more scalable platform; and five, enhance our customer relationship management, the CRM.

On the store technology side, as you know, we've rolled out handhelds to our entire store base -- we rolled out handhelds to our entire store base before the holiday season last year. The mission of our in-store digital experience strategy is: one, enhance how customers engage with the Finish Line and the products we sell in a way that is natural to their current behaviors; and two, enable the Finish Line sales associates to better serve its customers and drive conversion. In addition to the checkout functionality, which has received great response from our customers and our store associates, we are continuously working on adding new capabilities to the devices, such as Winner's Circle loyalty sign-up, gift card sales and inventory search capabilities, just to name a few. These handhelds are being used for more than 30% of customer transactions today and are already helping drive the increased sales productivity in our stores.

In summary, there are multiple operational accomplishments in the first quarter. With improving revenue trends and disciplined expense management, we delivered $0.20 in adjusted earnings per share. Our digital business continues to represent an increasing percent of our sales mix while also delivering improved profitability. And we see customer behavior and preferences continue to validate our strategy of transforming our company into a leading multi-divisional omni-channel retailer. Macy's is off to a great start, and we added productive stores to our store base at the Running Specialty Group.

With that, I'll now hand the call back over to Ed to walk through the first quarter financials in more update -- in more detail and update you on the longer-term outlook.

Edward W. Wilhelm

Thanks, Glenn. My comments will focus on results that exclude the start-up costs associated with our Macy's partnership. As we highlighted on our fourth quarter call in March, we incurred a one-time charge in connection with start-up costs and inventory disposal costs associated with getting the initial Macy's product assortment in place. These charges amounted to $8 million on a pretax basis or $0.10 per share in EPS impact. Please see the financial tables in our news release which reconcile non-GAAP results to GAAP.

For Finish Line, first quarter comp sales were up 2.4% on top of an 8% increase a year ago. For the stores, comp sales increased 1.2%. Digital comp sales increased 11% for the quarter and represented 12.4% of total sales, while operating margins for that business expanded 220 basis points year-over-year. With respect to cadence, comps were up 1.3% in March, strongest in April, up 7.7%, and down 1.2% in May. June comps to-date are down mid single-digits. June month-to-date comps have been impacted by the later timing of some key Brand Jordan product launches versus a year ago. The shift in these launches, while negatively affecting June, will have a positive impact on July and August. Therefore, we expect July and August to make up the deficit we posted quarter-to-date. On the category side, footwear comps were up 3.9% and the softgoods comp decreased 10.2%. Footwear ASPs increased 7%.

For Q1, consolidated sales were up 10%. This increase was made up of Finish Line sales that were up 4.8%, sales associated with Macy's of $13 million and Running Company sales that contributed almost $10 million versus prior year of $6 million. Consolidated adjusted gross margin rate decreased 70 basis points from the year ago to 32.1%. Product margin, net of shrink, was down 40 basis points, due to higher markdowns as we continue to adjust our product assortments to customer demand. Occupancy deleveraged by 30 basis points. Consolidated adjusted SG&A expense was 27.7% of sale, which deleveraged 110 basis points from last year, due primarily to the initial ramp-up of costs associated with building a team and infrastructure for our Macy's business and only partial sales for the quarter. Additionally, we continue to invest in our systems and organization to implement our omni-channel strategy. On a consolidated basis, first quarter adjusted net income decreased 19.1% to $9.9 million and EPS was $0.20 compared to $0.24 in the first fiscal quarter last year.

Now moving to our balance sheet. Inventory was up 2.6% for Finish Line and it was up 23.7% on a consolidated basis. The majority of the consolidated increase is associated with the takeover of athletic footwear for Macy's. We will have completed this transition phase with Macy's inventory by the end of Q2, at which time the net working capital investment going forward will approximate $30 million. Capital additions to fixed assets were $12 million in the first quarter, which excludes $6.4 million accrued in accounts payable at quarter-end. For the full year, we still expect CapEx to be in the range of $80 million to $90 million, which includes an estimated $18 million in capital outlay associated with building out shops at Macy's. Depreciation and amortization expense was $8.8 million for the quarter, and the full year will be between $36 million and $38 million. We ended the quarter with $195.9 million in cash.

Our store activity for the quarter was as follows: for Finish Line, we ended the quarter with 651 stores, including 10 openings and 4 closings. In addition, we repositioned or remodeled 3 stores during the first quarter. For the full year, we still anticipate opening 20 to 25 new Finish Line stores, closing 10 to 15 stores and remodeling and repositioning 25 to 30 stores. For Running Specialty Group, we acquired 9 stores and opened 2 new stores during the quarter. For the full year, we are planning 30 new stores through both acquisitions and openings. Also during the quarter, we added 41 Finish Line-branded shops within Macy's, giving us 44 as of June 1, and plan to open approximately 180 this fiscal year.

During the quarter, we bought back 366,000 shares, totaling $6.8 million, which leaves us with 4.6 million shares remaining for repurchase under the current board authorization. Based on our first quarter performance, combined with current visibility, we remain comfortable with our initial outlook for fiscal 2014, which calls for adjusted diluted earnings per share to increase in the mid single-digit range compared to the adjusted EPS of $1.47 in fiscal 2013.

Before I turn the call back to Glenn, I want to spend a moment outlining our updated long-term goals. By the end of fiscal 2017, so in 4 years, we expect to hit $2.2 billion in sales. This will be achieved through mid single-digit growth in our core Finish Line business, with digital revenue growing in the low 20% range and store revenue increasing low single-digits. In fiscal '17, we expect our Macy's business to generate revenue of $250 million and Running Specialty Group to contribute $200 million to our consolidated results. Driven by this top line growth and the disciplined capital allocation strategy, we expect to generate an adjusted bottom line, compounded annual EPS growth rate in the low-teen range over the next 4 years.

Now, I'll turn the call back to Glenn for his closing comments.

Glenn S. Lyon

Thanks, Ed. It's been a productive start to the year with some key accomplishments in Q1. We delivered against our expectations for the quarter and are managing our business with disciplined cost controls. Good progress was made on the Macy's rollout, as well as on the store growth front at Running Specialty Group. The early signs that running trends are improving, combined with continued strength in basketball, make us confident that we're well-positioned to deliver on our strategic and our financial goals for the year.

Operator, we are now ready to take some calls -- some questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Kate McShane from Citi.

Kate McShane - Citigroup Inc, Research Division

Glenn, I was wondering if you could walk us through what inning we are with transitioning the store mix. I know you were trying to get a better balance between running and basketball. And with regard to some of the changes you announced today, like the new apparel program and the accessories, what's the timing around that?

Glenn S. Lyon

Yes, Kate, I don't think it's a matter of changing the mix because as we -- we've continually said, we focus on running. We are about running. We live and die with running. The opportunities that basketball are presenting us are opportunities that Sam and the team are taking advantage of, but our work with the brands is around being the leader in running. And that's an ongoing effort and will continue to be an ongoing effort that -- no change. So I don't see any big changes in the mix. We'll continue to look at improving the quality. And that's how we're going to work that.

Kate McShane - Citigroup Inc, Research Division

Okay. And the timing of some of the new programs you announced today?

Glenn S. Lyon

All of these are ongoing. Look, the innovative pipeline that's going on in the market continues. The relative success that we have in the marketplace is on us, with our brand partners, to create compelling assortments, winning assortments in the market. So the opportunities are there, and they continue to -- quarter-by-quarter, Sam and the team are excited by what's coming about, and I think you're going to see continued improvement in that running business as we go on.

Kate McShane - Citigroup Inc, Research Division

Okay, that's great. If I could just ask one more bigger picture question. Just with the additional doors that you're opening at Macy's, do you have any thoughts or evidence about what the extra capacity and extra inventory in the markets is doing to the overall competitive environment?

Glenn S. Lyon

Well, I can only speak for us, and as we look at our Finish Line stores, in the Macy's -- in the malls that Macy's is now open, so we're now about 50 -- 60 as of today, it has had no cannibalization on our business. In fact, those 50 stores, as of last week, were performing better than the rest of the chain. I can't give you a reason for why they are better, but I could tell you this: there's no cannibalization going on so far, and so now we're starting to get confident that our original premise was true. What effect that's having on the rest of the marketplace? I don't know. I mean, we hear still good things about athletic footwear in the marketplace in general, so I don't think that this is a big change. I think it's an opportunity for the brands, for Macy's, for the Finish Line to add revenues to our category and for all of us to share in the profits.

Operator

Your next question comes from the line of Robbie Ohmes from Bank of America Merrill Lynch.

Robert F. Ohmes - BofA Merrill Lynch, Research Division

Two follow-up questions on Kate's line there. The first, can you talk about this upcoming back-to-school? You're up against a pretty tough comparison, I think it's around a 12. And maybe, Glenn, just give us the puts and takes in terms of -- you mentioned the Jordan launch shift is expected to help in July and August. Can you talk about the rest of basketball and how that looks? And then also running, maybe remind us what you're up against in running for back-to-school and whether some of the drag you've been seeing from Reebok is -- you're getting beyond that. And then maybe also, you mentioned apparel and softgoods, the comps obviously very weak in the first quarter, but you got a lot of initiatives. Maybe some more guidance on the timing and whether these could hit for back-to-school and you could see softgoods flip to a meaningful comp contributor in the near-term? And then I have a follow-up after that.

Glenn S. Lyon

Robbie, look, before I give you any specifics, and I may even ask Sam to give you some of the specifics on this, look, there continues -- we're coming off some good numbers here. You saw it, 8 in the first quarter, 12 in the second, and that kind of moderated and we were up 4 in the third and 1 in the fourth, comp-wise. There is going to be some ebb and flow to our numbers. But I can tell you, overall, when we look at the initiatives, the apparel initiatives, the running initiatives, the basketball initiative, I think we have put together a package of products that's going to get us to the numbers that we have forecasted, based on history, based on forward looking, based on our enthusiasm about the offerings that we're going to put out into the market. Maybe I'll give Sam an opportunity to give you 3 or 4 highlights, specifics to that. But there'll be ebb and flow, Robbie, it varied last year.

Samuel M. Sato

So Robbie, let me just -- let me address 2 key subjects: One is the Jordan timing comment Ed made as it relates to June and Q2 in total. June is largely affected by some timing and quantity issues. In fact, we've got a big release tomorrow, as you know, the Retro VIII that will set us back closer to flat to slightly up, and then as we move through Q2, the release has worked to our advantage in terms of quantity. And then in terms of back-to-school, we see a lot of product innovation, especially around the running category, come into market. You've seen recently, we launched Under Armour Spine technology with a laser, which is an exclusive shoe to Finish Line, that has gotten out of the gates extremely well. As we move into mid-July and into early August, we're launching actually 3 new products that we think are really going to move the needle, first is Flyknit 3, from Nike, launches in early August; and then we've got 2 really exciting technologies from adidas Boost, which you may know is already performing extremely well in Running Specialty and the mall gets a shot at that come July; and then the much talked about SpringBlade, which is all over the blogs today, we've got a significant leadership position against that launch come August as well. And so, we think the product pipeline, specifically around running, is extremely rich and are confident that, that's going to help propel our Q2 results as well as uphold our longer-term outlook for this year.

Glenn S. Lyon

You want to follow up?

Robert F. Ohmes - BofA Merrill Lynch, Research Division

And then just -- sorry, just on the -- that's very helpful. On the -- sorry, on the apparel side, just sort of the timing of when you could see the softgoods comps revert back to positive and what you're doing...

Glenn S. Lyon

We have 2 key points in time, right, in our apparel year. One is back-to-school and the other one is holiday. So for back-to-school, off of tests and changes we've made in our assortment, we expect to see improvement. As we get to the fourth quarter, we expect to see positives. So a lot of this has to do with sell-through, Robbie, and -- but I will tell you, we've changed our attitude, we've changed our mix and I think you're going to see a better apparel and accessories assortment than you've seen from us in the last year or so.

Robert F. Ohmes - BofA Merrill Lynch, Research Division

That's great. And then just my last question, Ed, you gave us the $250 million revenue target in 2017 for Macy's.

Edward W. Wilhelm

Yes.

Robert F. Ohmes - BofA Merrill Lynch, Research Division

Any kind of range on the operating margin that you can remind us that you'd be looking for on that?

Edward W. Wilhelm

Yes. So we talked about initially a business with Macy's that could do between $250 million and $350 million longer-term ultimately, and the midpoint of that range we said would be delivering high single-digit operating margins. So at the low end of that sales range, we're a little above -- a little below that. If we can continue to drive higher sales levels there then we could be a little above the midpoint -- the high single-digit operating margin.

Operator

Your next question comes from the line of Taposh Bari from Goldman Sachs.

Taposh Bari - Goldman Sachs Group Inc., Research Division

Glenn, I wanted to follow up on the question about Macy's. So your women's business -- I'm sorry, at Finish Line is getting weaker, yet you're pleased with the Macy's shops where women's represent a large majority of the mix, so can you just help me reconcile those comments?

Glenn S. Lyon

I think it's all about performance versus casual. And the performance category on the women's side and the Finish Line, although okay, hasn't been great, and the casual part of it has not been terrific in the Finish Line stores. However, same kind of product -- and look, this goes back to the cannibalization issue. This is incremental in the marketplace, and we think that, that offering to the Macy's customer is resonating. So I don't think it's -- to us, it's not been nuclear physics, it's what we hoped for and what we're getting. And to a great extent, that is -- the assortment in Macy's is a more casual, sneaker assortment than it is driven off of performance.

Taposh Bari - Goldman Sachs Group Inc., Research Division

Okay. So all right, would you say that the Macy's business is kind of performing to plan, above plan?

Glenn S. Lyon

Yes. Let's say, off of 50 stores and conversions that have happened as close as a week ago, we're on plan, and that we're sitting here pretty optimistic about the future.

Edward W. Wilhelm

One thing that's clear to us, Taposh, is as we're branding these shops, the acceleration in sales that we're seeing, when we pull together the assortments in the stores, we staff it with Finish Line-trained employees and provide the merchandising displays, that we're really excited about what we see as we brand these stores, which is why we're working with Macy's as hard as we can to roll out shops as aggressively as we can.

Taposh Bari - Goldman Sachs Group Inc., Research Division

Okay, great. We've seen some of the stores, and they do look great. I just wanted to follow up on the capitalization point, Glenn. So you're saying the 50 stores -- or 60 stores that you have opened so far, are outperforming the chain, but I'm just trying to understand, have they been outperforming the chain prior to these shops being introduced -- or prior to the shops being introduced? Just trying to get a sense of why [ph] those are the best-performing stores in the chain to begin with.

Edward W. Wilhelm

Yes, Taposh, we measured the cannibalization effect, as you would have expected, we looked at performance for those stores going into the branded shop in installation and then coming out of the branded shop installation. And these stores that Glenn were referring to improved a bit after the branded shops were put in place. But most importantly for us, we're seeing absolutely no signs of cannibalization in these stores.

Taposh Bari - Goldman Sachs Group Inc., Research Division

Okay, last one for you -- for Ed, so the new long-term plan for 2017 calls for low-teens EPS growth. I guess, a, does that factor in share repurchases; and b, it seems like a deceleration from what you provided last year. I think you were seeing mid- to high-single -- or mid- to high-teens growth by 2015, 2016. Just why the decelerated rate?

Edward W. Wilhelm

Yes. So it does factor in share buybacks, the continuation of our capital allocation strategy to buy back shares. And in terms of the goal, you remember last year, FY '13 ended up lower than what we had envisioned when we'd laid out these longer-term goals about a year ago. That's due to the softer running trends. So we're starting from number one, a lower base. Also based on that, we are a bit more modest in our near-term outlook, but that's offset by the inclusion of Macy's into the mix. And remember a year ago, we didn't have Macy's, and this year we do, so Macy's is now included in our long-term plan. So we're getting to a similar number that we talked about last year, that $2.50 a share number, but we're getting to it a year later. And remember, as we get to FY '17, we're going to have a more diversified mix of businesses, and these businesses are going to have more room for margin expansion, particularly within the Running Specialty Group, particularly within Macy's, and also still with our digital business. So that's how we're looking now at our long-term plans.

Operator

Your next question comes from the line of Bernard Sosnick from Gilford Securities.

Bernard Sosnick - Gilford Securities Inc., Research Division

First, I'd like to address a comment to Steve Schneider, who, since the IPO, I guess it's 21 years, has always been a consistent indicator of Finish Line's quality management and candor. So Steve, proceed with your retirement plans, but don't leave too soon.

Glenn S. Lyon

Bernie, I'm not letting him leave. He's not leaving before I leave. This guy, as you know, Bernie, and you've been there, this guy has been an unbelievable contributor to this business, and we're going to scale him back a little bit, but not that much. He's right at our side and his office is right next to mine, and he's going to stay there.

Steven J. Schneider

And Bernie, from many, many years ago, when we went public and you were part of that as well, that we've had a great working relationship, and it's been an amazing run. And I'm not going out so quickly, but it's just going to be a little bit of a change in my responsibilities, and net effect, it's a positive for both the company and myself.

Glenn S. Lyon

Succession is a good thing. Planning succession, as our friends in Beaverton would tell you and all the great talent that's gone through Beaverton in the years. And just think about a company like that, that can take their 2 leaders and have them retire, guys who did sensational jobs for 25, 30 years, and I can tell you now, they're going to be better. The people that they have succeeding them are strong, great leaders, and we're going to get better with them as time goes on, so I'd like to model our company after that, and we'd be pretty sustainable and pretty successful.

Bernard Sosnick - Gilford Securities Inc., Research Division

Well, great. Now let me ask you a question, Glenn. It seems that the Macy's business is only on plan for you whereas Macy's, at the meeting on June 11, said that it was beating plan, a great success, and exciting growth potential. So can I assume that the Macy's shops might reach the same level of sales per square foot productivity sometime within the next year as you have in the Finish Line stores?

Glenn S. Lyon

Bernie, these shops are going to be more productive per square foot than the Finish Line. The traffic generated in these Macy's stores is mind-boggling to me, as I travel around, whether it's Tuesday morning or Saturday afternoon. So the opportunities and -- I don't think we know what the top is, and I'm really happy that Macy's is more optimistic and we're maybe a little bit more conservative, but we'll keep driving to reach the top of the range, and I think we're all positioned properly. They've been great partners to us. They've been very supportive of our initiatives, and they welcomed our people into their stores. It's all good, Bernie. So if we're a little conservative, it's only because it's early in the game.

Bernard Sosnick - Gilford Securities Inc., Research Division

Well, knowing what Macy's does in the shoe department, can I assume that you have a vision of maybe $500 or more per square foot in your shops?

Glenn S. Lyon

Fair assumption.

Bernard Sosnick - Gilford Securities Inc., Research Division

Okay. Since you have the personnel under your payroll in Macy's, there was an execution risk. But it seems that with sales running ahead of plan, as far as Macy's concerned and the numbers you are telling, that the payroll is pretty well covered. Is that a correct assumption?

Glenn S. Lyon

Yes. Bernie, I think Macy's knew that, right, that they couldn't provide the kind of service and product and generate the business in a way that was supportive of the brand's initiatives. So we became the right guy at the right time to execute something that wasn't necessarily in their strength. So I think it's good, good on both sides, and I think it's being proven out, that this model helps them, and it certainly creates an opportunity for us.

Bernard Sosnick - Gilford Securities Inc., Research Division

I interpreted Macy's comment as an indication to vendors that there's all the more reason to create product for department store-type customer. Is that the kind of reaction that you're seeing?

Glenn S. Lyon

We're working on all fronts to create a more compelling assortment that is tailored specifically to department stores, to Macy's and exclusivity. The assortment that we've put in, so far, is a combination of information that they had and the strengths of their business, as well as the strengths of ours. Now, you take that to another level, as we get bigger and stronger in there, and you start to think about the exclusives and the initiatives we can put together with the brand, yes, I think Macy's is encouraging and you can only imagine how we're encouraging the brand to participate in a segment with great growth potential for department stores, Macy's in particular, and Finish Line getting the -- taking care of that opportunity.

Bernard Sosnick - Gilford Securities Inc., Research Division

That's great to hear. Just one detail, I missed the number for kids for the quarter, how did that compare in comps?

Glenn S. Lyon

It's up double digits.

Bernard Sosnick - Gilford Securities Inc., Research Division

Kids is up double digits?

Glenn S. Lyon

Right.

Operator

Your next line -- your next question comes from the line of Mitch Kummetz from Robert W. Baird.

Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division

Let me start on Macy's. You guys mentioned 180 stores by the end of the year. I mean, are you looking at sort of 45 stores a quarter? Does that accelerate at some point? If you can just kind of walk through that.

Edward W. Wilhelm

Yes, we're -- about 20 to 30 a month is what we're doing. We might -- there might be some months when we do a few more. But that's the range that we're looking at, and we'll be completed -- the expectation is that we'll be completed in a 2-year time frame.

Glenn S. Lyon

Look, Mitch, it's hard work. You got to hire people, you got to create the assortments, you got to build it out. We would -- based on the results we're seeing, we'd like to go 40, 50 a month and get it done faster and maybe even get into next year's plan, but we're not going to do it at the risk of execution. We just won't do it.

Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division

Got it. Can you remind us...

Glenn S. Lyon

First impressions are everything.

Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division

Okay. Can you remind us, what your sales target is for that business this year?

Edward W. Wilhelm

Yes. $130 million to $150 million.

Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then I guess, second question, just talk a little bit about your margin outlook on the year. Specifically, on gross margin. You saw some nice sequential improvement on the product margins going from Q4 to Q1. It sounds like the running business is starting to come back for you guys pretty good. I don't know if that means that either there's less product adjustment that you now need to do relative to maybe what you were thinking a quarter or 2 ago, but how do you think product margins play out over the balance of the year?

Edward W. Wilhelm

Yes, our specific guidance on product margins for the year were to be flat to down slightly. And we said that we'd have more pressure on those in the first half of the year and more opportunity in the second half.

Glenn S. Lyon

And from my perspective, we are very diligent and have been over a long time now. Very diligent about managing through our inventories, keeping it current, liquidating products in a timely way. The new products that are coming in have performed. The biggest challenge we have had is the sustainability of sell-through. So that mid -- that 60, 90 days in, maintaining higher sell-throughs has been challenging to us over the last 9 months. So hence, you see the challenges we had in the margin. But in terms of keeping it clean and fresh, I think we have created and maintained that standard and will continue to do that. And when we cross the line, the margins will go positive.

Operator

Your next question comes from the line of Matt McClintock from Barclays.

Matthew McClintock - Barclays Capital, Research Division

Glenn, I wondered if we could stick with the topic of Steve transitioning to another role. You have a lot of initiatives going on right now, and I just wanted to get your updated thoughts on the management structure, as it stands once Steve takes that new role. And should we be on the look out for more new key hires in addition to a Chief Digital Officer?

Glenn S. Lyon

Well, look, as I started to say before, there are 2 investments in this day and age in the retail business that you must make. And people still stays at the top of mind and then that follows with technology. And we have made investments over the last couple of years. We've added some people to the organization, to the merchandising team, to the supply chain team. So we have added staff here, and actually, we've been challenged by the Street as to the degree to which we have done that. Again, I'll point out that great companies invest in people, and there are times that your -- the effect on the P&L is a little bit more. But ultimately, I believe, and I'll continue to lead this company under the guide that -- the guideline that says, people are the best asset that you can have. We didn't have a business development organization 2 years ago. We added Mark Landau, who has an extensive background. He's built a team. That's enabling us to do the Gart deal. Mark put together the Macy's deal. So these are investments that we made for the long-term benefits of our company. We recognize that we've got to return to shareholders, and we're certainly sensitized to that. But I'll stand up for what we've done, and when I've got somebody like Steve -- first of all, Steve's not retiring so fast. I assure all of you that. This guy has been here from day 1. He has been an unbelievable partner, mentor to me, and I'm not letting him go so fast. So he's going to play an important role as we look at all of these initiatives. This is a changing world. The lines are blurred between digital and brick-and-mortar. We've got to figure out better ways to return better to the shareholders. Steve is all part of that. The real estate community is challenging today, how to take advantage of the best malls in America and have deals that makes sense for both the landlords and us. Steve ran the real estate business here, with George Sanders, for years. Steve is going to continue to spearhead different initiatives to make sure that we return at the top levels that we possibly can. So I'm going to stand up for building organization. And look, people could've said that about Nike over years. There were plenty of people at Nike that everybody wondered what they were doing. And they were waiting in the -- kind of in the background and then when their number got called, they were there to fill positions, along with young people in the organization who they were grooming to take jobs. I think it's a wonderful example. And as I said before, that's what I'm going to stand for and that's what Finish Line will in short-term and long-term. Sorry, I got on a soapbox there a little bit, but when you say Schneider to me, I get excited.

Matthew McClintock - Barclays Capital, Research Division

That's a lot of great color though, Glenn. But I was just more focused on, in terms of organizational structure, are you going to fill the President role or the Chief Operating Officer role? Or will this now just be the direct reports to you on an ongoing basis? Just so we could better understand...

Glenn S. Lyon

No. So we won't fill that role. And again, because of what we have done here, bringing Ed in a few years ago. So we'll take Steve's direct reports and a couple of them will report to Ed, supply chain and IT specifically. I'll take legal and real estate. So in essence, yes, there'll be a cost savings. I will tell you, that wasn't the total motivation to this, but there is some savings that gets us to a point that's a little more efficient than we would've had with the senior leadership team. And then of course, we are actively pursuing the right leader for our digital business, and we are looking for someone who, technically, and from a vision standpoint, gets what the future of that business is. But we also want someone in there who's going to be a great leader. One of the good things that came out of the changes in our digital group out in Boulder is there are 3 people, as well as somebody who's running our -- the IT part of our business, who have stepped up and have done a terrific job for us during the transition. And that gave us even clearer vision to a better organization, empowering them, giving them accountability to their areas of responsibility, and they've stepped up big time, and I think you'll see that payout for us as time goes on. So nothing else structurally. We've added a supply chain Senior VP to the organization. But other than that, nothing else on the horizon that's going to necessarily change the makeup of our leadership team.

Matthew McClintock - Barclays Capital, Research Division

One more if I may. Ed, regarding the guidance, you previously stated that first quarter would be the most -- would feel the most comp pressure, but you ended up doing a 2.4%. And I was just wondering, could you help us, maybe in more detail, understand how your outlook for the rest of the year has changed, as you've kept the full-year guidance flat?

Edward W. Wilhelm

It really hasn't changed. And I mean, Q1 is still pretty small. It's still early in the game, with respect to the year, to make any changes in our full-year outlook. So we're continuing to work through the category shifts that Glenn had talked about. We're up against difficult Q2 comparisons, which Glenn talked about, and the environment remains choppy. So all in all, yes, we're off to a solid start in Q1. We're very pleased with our performance, and we're absolutely confident in our ability to deliver our full-year outlook.

Operator

Your next question comes from the line of Eric Tracy from Janney Capital Markets.

Eric B. Tracy - Janney Montgomery Scott LLC, Research Division

So I guess, if I could follow up with many questions on Macy's, just trying to get a sense, again, of where -- be it from an inning perspective of -- I know you're constantly testing and trying to get the assortment right. But Glenn, where would you say you guys are with that? Are there vendors, brands that you don't currently have, that you still would like? Just give us a sense of where you are in testing, in getting an assortment the way you want it.

Glenn S. Lyon

CC Sabathia is in the bullpen warming up. We haven't even gotten to the first inning, okay? Everything we've done has been -- exceeded our expectations, and just as importantly, exceeded Macy's expectations. So I got CC coming in to the game and I got Mariano in the bullpen, and I'm feeling good about my opportunities at Macy's. Those are a [ph] New York thing, right, so everybody understands.

Eric B. Tracy - Janney Montgomery Scott LLC, Research Division

We got it. All right. Then I'll move on to, we haven't really touched on the running specialty opportunity. It looks like 30 new doors this year. Just give us a sense of, from acquisition versus sort of organic, what the acquisition pipeline looks like. Is there any change to sort of accelerating or decelerating, based upon what you're seeing in the market?

Glenn S. Lyon

Yes, we set out with a set of projections that said 60-40, acquisitions to greenfield -- to openings. And yes, today, we're very optimistic about the acquisitions because the Garts have been successful in the marketplace, doing groundbreaking work with -- in building relationships with a lot of these independent guys, and quite honestly, the Boulder Running Company thing was a big deal to us. That was one of the real gems in this industry. And they are -- and that helps us and that gives us credibility. In that the Garts can work with these people and create opportunities for them, or create an exit strategy. So I think the market is starting to understand, and as I alluded to, the pipeline is getting stronger and stronger. People are much more interested in joining us and the roll-up strategy stays very much intact. I think we're going to get there and maybe exceed.

Eric B. Tracy - Janney Montgomery Scott LLC, Research Division

Okay. And then just lastly, I mean, again, then it's hard not to say, relative to last quarter, your sort of tone around the running business, certainly seems more bullish, and for good reason, given the pipeline of new products in the marketplace. But I guess, for you, or even for Ed, I mean, again, remind us where we are? What leverage point do you need? What's the comp to lever occupancy and G&A? Has it changed at all? Have any of sort of the productivity enhancements you've made in the stores altered that leverage point?

Edward W. Wilhelm

Yes, there's no changes there, Eric. I mean, on the occupancy side, I mean, this year at Finish Line, it will take a high-single digit to leverage there. And on the SG&A side, a low-single digit this year. That SG&A leverage point will probably remain kind of low-single digit if you look out a couple of years, but on the occupancy side, the leverage point will come down from the high-single digit to mid-single digit-ish over the next 2 years. And then probably 2 years out, once we cycle through the transition that we're working through with getting long-term leases in place for our best-performing stores in the mall, the leverage point will be a low- to mid-single digit-ish leverage.

Operator

Your next question comes from the line of Chris Svezia from Susquehanna Financial.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Steve, I wish you all the best.

Steven J. Schneider

Thank you, Chris.

Glenn S. Lyon

He's not going anywhere, Chris.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

I know he's not going anywhere, but...

Glenn S. Lyon

Be nice to him, but he's not going anywhere.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Well, anyway, I am curious about -- well, I got to ask a question about Macy's. First, Ed, for you, is it accretive still this year?

Edward W. Wilhelm

Yes. We're on track. We said at the beginning of the year, modestly accretive. We're absolutely on track to deliver that.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. Glenn, no baseball analogies, but I mean, what have you really learned so far in 60 stores? You see product when you walk in them, you see some Flyknit, you see some $195 Mizunos, but you also see shoes at $40 and some markdowns here and there. There's a lot of variation in the assortment. What is the customer telling you? What are the price points they like? What -- I mean, any additional color about it will be helpful.

Glenn S. Lyon

Sam can give you some of that, but I'll tell you the headline is service. The thing that we are most happy about is, as we go from a model that just puts the inventory in, to a model that we just service it, and we have done -- we've moved up our schedule on putting staffing in, in a couple of situations on a test basis before we build out the shop, which was not our original plan, and we have had success right up to and including Herald Square. So we're going to do Herald Square, I think it's in a couple of weeks, 2, 3 weeks. But we have our staff in there and the business has been great. So that, to me, was the best -- the most -- the best realization of the first 6 weeks that we've been in business there. Now, I'll let Sam give you a little color on the product.

Samuel M. Sato

Thanks, Glenn. So we're also, in the 6 weeks or so, we've put our inventory in there. We're monitoring 3 key elements around assortment, performance versus casual, and we're starting to see that the casual part of the business is a bigger percentage than what we see in our Finish Line stores. Price points, really, are similar to what we experience today, and that's -- it's a wide range. But clearly, the consumers' appetite for innovative products that are, in fact, higher-priced, over $100, there's no resistance there, and so, we're seeing really terrific sell-throughs on better-priced products. And then the brand make up, we continue to watch for how the brand matrix at Macy's and for that consumer differs from what we anticipated, and we'll make the appropriate adjustments to our buys as we move forward.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. And then just on the running concept, $200 million by fiscal year '17 in revenues. Is that a profitable business by then?

Samuel M. Sato

Yes, absolutely.

Glenn S. Lyon

Yes. Absolutely.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. Digital, the reaccelerate -- I think you said, was up 11% in the quarter, I believe.

Edward W. Wilhelm

Yes.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. The reacceleration to over 20% or about 20% growth, how -- walk us through how you get there.

Edward W. Wilhelm

Yes, so with the digital business being up 11% in the first quarter, we're managing both the top line and bottom line there. So we had operating margin expansion of 220 basis points, and that's on top of last year, where we increased the margins in this business 500 basis points. So we're still balanced in our growth. But most importantly, we want to make sure that we take care of the customer in whatever channel that they want to engage with us, and that's how we're putting together this omni-channel strategy. So accelerating from low double-digit to 20%, we still are planning the enhancements to our existing website this year, all of which are designed to improve the customer experience and drive sales. We're planning for the migration to a platform, that will occur probably next year sometime, and that will help increase sales as well. So there's still investments we're making in this business, both in technology, as well as marketing, that are going to increase the sales and the profit for this business.

Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division

Okay. And 2 last things. Just maybe, Sam, for you, ASP trends, how should we think about that? And June as a percentage of the quarter, I guess, it's got to be pretty small. But just any color around that.

Edward W. Wilhelm

Yes, I'll take that one, Chris. June is about 30%, which is a similar level as July, then August, obviously, is the bigger month.

Samuel M. Sato

Footwear ASPs, as Ed said in his prepared remarks, run at about 7% ahead versus a year ago in Q1. We think that, that will moderate as we move into the back half of the year. But ASPs, we think will continue to be greater than they were a year ago.

Operator

Your next question comes from the line of Seth Sigman from Credit Suisse.

Seth Sigman - Crédit Suisse AG, Research Division

So on Digital, I mean, maybe can you just elaborate on the operating margin improvement this quarter? And then I may have missed this, but the timeline for some of the next steps there, and then a follow-up.

Edward W. Wilhelm

Yes. So the operating margin improvement came from both gross margin improvement, as well as leveraging the SG&A. And then the timeline for the changes that I talked about were this year, for enhancements to the existing website, and then on platform migration, sometime early part of next year.

Seth Sigman - Crédit Suisse AG, Research Division

Okay. But anything else we can add on that gross margin improvement? Is that mix, is it just less promotion, shifting people away from clearance, as you've talked about in the past?

Edward W. Wilhelm

Yes, all of that.

Glenn S. Lyon

All of it.

Edward W. Wilhelm

Yes, it is all of that. And again, with the strong basketball business and the Jordan business, a lot of that is sold online, and the digital business as well, so it's all of that.

Seth Sigman - Crédit Suisse AG, Research Division

Okay. And then just early results in the Macy's digital business. I mean, what are your learning from that? And as you think about the long-term guidance you provided, I mean, would you expect the mix of digital versus retail to be similar to your core business?

Glenn S. Lyon

Very early in that game, right? We're about 3 weeks, 4 weeks old on that and so, not a lot of information to share. Our goal, originally, was for it to be at the same kind of ratio. And we just don't have enough information to say. As we go along, obviously, it's an important part of the business through macy's.com as it is for Finish Line. So we'll monitor that. We'll give you information as we go along. But we are very early in that game.

Operator

Your next question comes from the line of Jeff Van Sinderen from B. Riley.

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Just trying to get a better understanding of how you're thinking about the running segment overall as you look at that over the next couple of years. Do you think -- I know your business got better in the last couple of months in running. But just trying to get a sense of, are you thinking that running goes back to a cyclical growth mode for the next couple of years? Or how do you think about that? I know there's some new exciting product coming out, and you expect some strength there, but maybe if you could just kind of frame that for us.

Glenn S. Lyon

This is Glenn. I don't think running slowed down terribly in the marketplace in total. In fact, if you listen to the Nike comments, even as late as yesterday, everybody continues to be very bullish. Now, I'll justify, we had a head start. We had some very powerful numbers, and I don't remember exactly, but we called those out last quarter on the call. And when we were running 20%, 30% increases for 2, 3 years, and we got that business up to almost 50% of our business. So we were ahead of the pack a little bit, and filling the initiatives that enabled growth, got to us for -- 6 months, things are better, but we're going to continue to invest. There continues to be product innovation. So I think this is about us executing with our brand partners, and that's what we're focused on. This is not about the running segment. There's plenty of juice in the running segment today and, obviously, we're invested in The Running Company, so it's very much a part of our future and we're positive about it. So this is on us and our brand partners to come up with enough initiatives to support growth. And I think Sam has said this before, we will always be opportunistic in terms of all the categories that we carry, but we will be purposeful in what we do in the running category to maintain a leadership position.

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Okay. And then I know, obviously, there's a difference between the women's business at your Finish Line stores and at Macy's, and obviously, you're feeling pretty good about the Macy's women's business. But when you think about The Finish Line women's business, how do you see that business? What do you see driving that business back to growth at this point?

Glenn S. Lyon

Yes, well, we've got to get the performance piece of this thing back to the kinds of levels that it's been. I mean, typically, historically, any of these sportive performance platforms, go back to Shox, go back to Air, when those things came about, women embraced those as much fashion as it was performance, but they were on performance platforms. We just haven't seen the kind of escalation to those things that we had seen historically. So it continues to be challenging for us to find and invest in more and more of the performance platforms to grow our women's business. That is still the center of our universe.

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Okay. So does that mean that you might shift more to having a higher concentration or penetration of women's casual product in your Finish Line stores?

Glenn S. Lyon

No. I think it means that we're going to work harder on the performance ends of our business to create initiatives with the brand that simulate growth. Again, we are running, and it is off of performance platforms that is the center of what we do. So our team in total is working towards finding the best products on performance platforms that we can grow on.

Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division

Okay. And then maybe if we can circle back to the softgoods business, you sound pretty optimistic about what you have coming in, in that segment. Just wondering if you feel like there was maybe a weather impact, or if you feel like you just didn't -- you just haven't had the right assortment of merchandise in softgoods. Maybe you could just touch on that?

Glenn S. Lyon

We don't use weather as an excuse here in general, and I'm certainly not going to use it in apparel. We've got to get better at it. We think that these guys have stepped up and done -- what's the definition of insanity, doing the same thing over and over and expecting a different result. Well these guys have stepped up and done some things differently. So I'm a bit cautious in saying to you that there's a turnaround evident here, but we certainly aren't doing the same old stuff. So I'm encouraged by that and I'm encouraged that the team has stepped up and started to exercise their creativity to change the way our apparel business is running. So we got work to do, continue with work to do. But it's not to do with outside influences, this is internal.

Operator

Your next question comes from the line of Paul Trussell from Deutsche Bank.

Paul Trussell - Deutsche Bank AG, Research Division

So I, too, am very pleased with what I observe from the branded Finish Line Macy's stores, but I wanted to speak about the balance of the business. Obviously, you have inventory in another 600 doors at this time, and even by year-end, there will be another 400 doors. Is there learnings from that side of the business that maybe you are looking to make adjustments on, particularly when it comes to how that product is being marketed? I mean, from what I gather, there is, perhaps, some initial disappointment that those goods are not being allowed to receive the kind of Macy's Friends and Family deals, One Day Sales, et cetera. I'm just thinking about your approach on that side. And then also, just for clarification purposes, the start-up costs related to Macy's, that hasn't -- that does not include any of the cost related to the $13 million in revenue that you generated this period, correct?

Edward W. Wilhelm

Yes. Correct. The start-up costs were start-up costs in connection with getting the initial inventory that we purchased for Macy's disposed of and then the freight and handling costs associated with getting initial assortments in place.

Paul Trussell - Deutsche Bank AG, Research Division

Right. And guidance for the full-year excludes that completely?

Edward W. Wilhelm

Correct.

Paul Trussell - Deutsche Bank AG, Research Division

Exactly. Okay, great.

Glenn S. Lyon

So you want me to answer the other part of that, was that from day 1, when we entertained this with Macy's, it was clear, to both them and to us, that we couldn't have our cake and eat it, too. And what we brought to the table was access to all of the best initiatives in the athletic footwear market. And we agreed that for the brand's benefit, for the ultimate consumer benefit of enabling them to buy these products in Macy's, that we could not run the promotional calendar the way Macy's was running it in other parts of their business. Now, Macy's runs plenty of businesses with plenty of brands, both they run them themselves, as well as they have arrangements the way they do with us, and you promote the products through initiatives, through storytelling and things like that, that the customers reacted to. So we'll have some promotional -- timely promotional activity. We'll participate in their marketing events at different times during the year. So, if you will, there's an opportunity to do more than we might even do at a Finish Line store, so based on the mix. But in terms of the iconic product, we all agreed from day 1, you couldn't have it both ways. You can't promote that stuff and break price, and Macy's got that. And Jeff Gennette and his team were very clear on that with us, and I think they're pleased that we're putting out the best product that's available in the market and both of us are benefiting from it.

Paul Trussell - Deutsche Bank AG, Research Division

Great. That's helpful. And then just, Ed, I apologize if I missed it. But as part of that long-term plan, are expectations for CapEx still at about $85 million or so for this year and next, and then a modest decline in '15 or '16?

Edward W. Wilhelm

Yes, that's right, Paul. Exactly right. Nothing's changed.

Operator

Your final question comes from the line of Camilo Lyon from Canaccord Genuity.

Camilo R. Lyon - Canaccord Genuity, Research Division

A lot of the questions have been asked. Just wanted to see if I could drill down a little bit and understand a little bit more about the dynamics within this June month quarter-to-date period. If you could just help us -- tell us maybe how many Jordan launches are not in this June versus last June? Just give us an understanding of really the delta and the swings that can happen as those launches are released to the market, that'd be helpful. And then the follow to would be, does the delay in launches impact your other businesses within the store? In other words, is your running business also impacted by that?

Edward W. Wilhelm

So the June business, to-date, had much stronger Jordan launches a year ago than what we've had so far this year. As Sam mentioned earlier, we've got a Retro VIII tomorrow that's going to help June a lot. And as we look at the balance of the quarter, July and August work to our favor in terms of Jordan launches. So we feel good about all of that. And in terms of impacts on running, I mean, there's a little bit of traffic that's driven to the store, but they're largely going for the Jordan Retro launch product, so we do get some benefits, but mostly, it's driven by the shift in basketball.

Camilo R. Lyon - Canaccord Genuity, Research Division

Is there any reason for that kind of the delay or the timing differences in the calendar that you're aware of?

Glenn S. Lyon

No. Look, Nike is very conscious of a good calendar, but you can't hold it to every day -- and there's got to be flow to it. And it does change subtly from year-to-year, and when it's all said and done. We actually can't even look at it by quarter, but I assure you that the growth we've had with Jordan, both sales and margin, has been significant to The Finish Line over the past 5 or 6 years, to the point that Jordan is a very significant part of our business and the sensitivity is still to that calendar is something that -- we have a lot of other things to worry about in terms of generating profit than the ultimate calendar of Jordan. I realize it's a bit disconcerting in the market when we're talking about the flow of our business, but we have this -- I mean, it's very predictive, so we know at the beginning of the month, within 5% or 10%, what the sell-throughs are going to be, obviously, what are quantities are by initiative, by style. So that's one of the more predictive things that we have, and just this year, it happened that June was lighter and -- as a proportion to the quarter as it was last year.

Camilo R. Lyon - Canaccord Genuity, Research Division

For the quarter, will launches be up year-over-year?

Glenn S. Lyon

Yes.

Camilo R. Lyon - Canaccord Genuity, Research Division

Yes? I'm sorry, yes?

Glenn S. Lyon

Absolutely, yes.

Camilo R. Lyon - Canaccord Genuity, Research Division

Okay. Great. And then just lastly on the E-commerce growth. The deceleration that you've seen on a tier basis over the last couple of quarters, can you help explain what really is driving that deceleration on the growth rate, Glenn or Ed?

Glenn S. Lyon

I think that the deceleration on the sales has created an acceleration on the profits. So we have had an adjustment there, in terms of what we're willing to invest and what we're willing to return, as the team refocuses the business to go back to a more aggressive sales plan as we go forward, but not at the expense of profits. We did, and we called this out -- we bought some customers over a couple of years. We're not in that mode today. We have many customers where we're trying to make sure our conversions are improving. The whole mobile thing has added a whole twist to this, in terms of the acceleration of the customers not only looking at us on the mobile site, but also buying from us. That decelerated, but it's accelerating off a very low level. We've actually had a 50% improvement in conversion on the mobile business, but it comes off of a conversion that was 1/3, less than 1/3 of what the web conversion was. So it's a dynamic -- to explain it in the course of this call is very difficult. What I would say to you is the dynamics that are at work are such that this takes great analysis and an understanding of where you want to be to maximize the profits and the revenues. So that 220 basis points this quarter, 500 basis points last quarter, we're not necessarily focusing on the acceleration or deceleration of the sale as much as of the profits right now. And as time goes on, we'll continue to use the learnings to accelerate our sales as we're confident it will, in turn, improve profits.

Thanks, Camilo, and thanks to all for spending the time with us. We'll be back in a few months to report on, what we hope, is an exciting back-to-school. Thanks for your time.

Operator

This concludes today's conference call. You may now disconnect.

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