Golf Galaxy, Inc. saw net sales for fiscal 2006 increase 50.4% to $200.1 million, from $133.1 million last year. The increase was driven primarily by the addition of 16 new stores to the total and a comparable store sales gain of 7.3%. The company reported net income of $5.3 million, or 47 cents per diluted share, for fiscal 2006, down from net income of $7.5 million, or 98 cents per diluted share, last year. Net income for fiscal 2005 included an after-tax gain of $5.0 million realized on the sale of the company's equity investment in Golf Town Canada Inc. stock. Excluding this one-time gain and giving effect to the conversion of preferred shares and the company's initial public offering as of the beginning of fiscal 2005, the company's pro-forma net income for fiscal 2005 would have been $2.5 million, or 23 cents per diluted share. A reconciliation of pro-forma net income and earnings per share is provided in a table that follows.
“We are very pleased with our performance in fiscal 2006. We opened 16 new stores, delivered a 7.3% comparable store sales increase, more than doubled our earnings per share on a pro-forma basis and initiated a key acquisition. And we delivered these results in the same period we completed our initial public offering,” said Randy Zanatta, Golf Galaxy president and chief executive officer. “We look forward to growth in sales and earnings again in fiscal 2007 as we continue to deliver on our 'Everything for the Game' brand promise for our customers.”
Fourth Quarter Results
Golf Galaxy's net sales for the fourth quarter of fiscal 2006 increased 49.5% to $40.1 million, compared with $26.8 million for the same period of the prior fiscal year. Comparable store sales increased 2.5% for the fiscal fourth quarter, on top of an increase of 4.8 percent for the fourth quarter of fiscal 2005. On Dec. 20, 2005, the company said it expected to report net sales for the fiscal fourth quarter of $40 million to $42 million and a comparable store sales increase in the mid single digits.
The company reported a net loss for the fourth quarter of $265,000, or 2 cents per diluted share, compared with its guidance for a net loss of $900,000 to $600,000. The company typically reports a net loss in its fiscal fourth quarter, a low volume period due to seasonality. Golf Galaxy reported a net loss of $451,000, or 74 cents per diluted share, for the fourth quarter of fiscal 2005.
“Our fourth quarter sales were on target in December and January but below our expectations in February due to challenging weather in many of our markets,” said Zanatta. “In addition, our margins were under pressure in December due to a high level of promotions, but recovered later in the quarter. Despite the margin pressure we experienced, our bottom line results were better than expected in the quarter, reflecting our ability to control expenses and the benefit of a more favorable effective tax rate.”
Golf Galaxy opened one new store during its fiscal fourth quarter. For the full fiscal year, Golf Galaxy opened 16 new stores. Golf Galaxy plans to open 14 to 16 new stores during fiscal 2007; the company has opened six stores since the beginning of the new fiscal year and currently operates 56 stores.
Company Outlook
The company said that for its first quarter ending May 27, 2006:
-- Net sales are currently expected to be $84 million to $88 million, an
increase of 43 percent to 50 percent over the first quarter of fiscal
2006;
-- Comparable store sales are currently expected to increase in the low
single digits; and
-- Net income is currently expected to be $2.0 million to $2.5 million
(pending the final purchase price allocation of The GolfWorks
acquisition); assuming 11.6 million weighted average shares
outstanding, diluted earnings per share are expected to be 17 cents to
22 cents.
-- Net income includes estimated expenses of approximately $200,000, or
2 cents per diluted share, relating to the amortization of intangible
and long-lived assets acquired in the acquisition of The GolfWorks;
and expenses of $200,000, or 2 cents per diluted share, from the
expensing of stock options.
As Golf Galaxy previously announced, for its fiscal year ending March 3, 2007, a 53-week period:
-- Net sales are currently expected to be $305 million to $315 million,
an increase of 52 percent to 57 percent over fiscal 2006;
-- Comparable store sales are currently expected to increase 6 percent to
8 percent; and
-- Net income is currently expected to be $7.5 million to $8.1 million
(pending the final purchase price allocation of The GolfWorks
acquisition); assuming 11.6 million weighted average shares
outstanding, diluted earnings per share are expected to be 65 cents to
70 cents.
The company added that net income for fiscal 2007 includes estimated expenses of approximately $800,000, or 7 cents per diluted share, relating to the amortization of intangible and long-lived assets acquired in the acquisition of The GolfWorks; and expenses of $1.1 million, or 9 cents per diluted share, from the expensing of stock options.
GOLF GALAXY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Amounts)
Three Months Ended
(Unaudited) Fiscal Year Ended
Feb. 25, Feb. 26, Feb. 25, Feb. 26,
2006 2005 2006 2005
Net sales $40,125 $26,840 $200,130 $133,080
Cost of sales 29,570 19,251 141,392 93,964
Gross profit 10,555 7,589 58,738 39,116
Operating expenses:
Store operating 8,213 5,490 37,512 24,382
General and
administrative 2,249 1,863 10,033 8,372
Preopening 911 932 2,923 2,095
(Loss) income from
operations (818) (696) 8,270 4,267
Other income - - - 8,410
Interest income (expense),
net 152 17 439 (4)
(Loss) income before income
taxes (666) (679) 8,709 12,673
Income tax benefit (expense) 401 228 (3,443) (5,135)
Net (loss) income (265) (451) 5,266 7,538
Less preferred stock
dividends - (939) (1,721) (3,696)
Net (loss) income applicable
to common shareholders $(265) $(1,390) $3,545 $3,842
Net (loss) income per
share:
Basic $(0.02) $(0.74) $0.51 $2.06
Diluted $(0.02) $(0.74) $0.47 $0.98
Weighted average number
of shares outstanding:
Basic 10,665,848 1,877,044 6,993,088 1,865,928
Diluted 10,665,848 1,877,044 7,542,385 7,721,333
