Forzani is Back in Black after Strong Q2 Comps…

The Forzani Group seems to have timed its Sport-Chek re-branding initiative perfectly, with the Canadian economy picking up and the sporting goods industry apparently firing on all cylinders north of the border. Since renovating its formerly struggling Sport-Chek banner, the group has experienced a string of positive comp store sales results, lower expenses, and less promotional competition. All of this added up to allow the Canadian retailer to swing to a profit during the second quarter.

During a conference call with analysts last week, Forzani CEO Bob Sartor couldn’t have been happier. “All of our businesses performed well, and we really had no operational areas of difficulty,” he said.

Even the company’s private label and wholesale business, which sells goods under the Gen-X name, did well during the quarter, with both the close-out and the licensing portions of Gen-X reporting positive results.

Overall, sales in the west were said to be stronger than in the east, but both areas were up for the quarter. Footwear, apparel, and hardgoods were all called out as strong categories. Particularly in women’s apparel, FGL said that the category was doing well on both the corporate and franchise sides. In addition, the company’s footwear business has put “positive comps on top of strong comps.”

The company’s franchise business continues to grow organically and through new store openings. The franchise division also has several new initiatives, including a new banner. Over the last several months, Forzani has been testing consumer reactions to a fitness store, called Fitness Source. Feedback has been positive, and the company anticipates launching this new concept in Q4. The golf business is on plan, and the company anticipates 40 to 45 franchise locations by year-end.

Back-to-school sales improved at both corporate and franchise stores, but the company continues to see this trend move later into September. For the first three weeks of the BTS period, which is also the first three weeks of Q3 of fiscal 2007, same-store sales in corporate stores grew by 1.1% while franchise comps grew 1.9%.

Back-to-school footwear has been led by Crocs and Heelys sales, while apparel is being driven by performance apparel and outdoor lifestyle. In addition, one-piece hockey sticks are driving hardgoods sales.

Margins slipped 10 basis points during the quarter due to the shift in mix between retail sales and wholesale sales, with Forzani’s wholesale business carrying slightly lower margins.

Looking ahead to fall, FGL has partnered with Ski Magazine Canada on a new marketing campaign. There will be a 48 page insert to the magazine in which the SMC editors tested all of the skis carried in Forzani’s retail shops and rated them based on relative strengths and weaknesses.

Forzani’s next step is the re-formatting of Sport Mart, which is currently under way internally, in terms of assortment and positioning. Next, the company will be communicating this to the customer.

After Q2, Forzani’s trailing 12-month EBITDA was $90 million. Going forward, the company believes it will improve on this number as it moves into the back half of this year due to positive comps in Q3 & Q4 as well as reduced expenses. Forzani will not have the increased marketing expenses related to the Sport-Chek re-launch, but the company expects sales to increase, boosting profitability.