The Forzani Group Ltd. reported net earnings for the fourth quarter were CA$21.1 million ($18.3 mm), or CA62 cents per share (54 cents), compared to the prior year's fourth quarter of CA$17.0 million ($14.6 mm), or CA51 cents per share (44 cents), a 24.1% increase in profits and a 21.6% increase in earnings per share.
Retail system sales for the quarter were CA$440.2 million ($381.8 mm), an increase of 0.5% from the comparable 13-week sales of CA$438.0 million ($375.1 mm). The results were impacted by the unseasonable weather in the East, offset by increases in Western Canada.
Same store sales in corporate locations were up 1.1% and down 2.9% in franchise locations, for an overall same store sales decrease of 0.3%.
Revenue, consisting of corporate store sales, wholesale sales, service income, equipment rentals, franchise fees and franchise royalties, was CA$353.2 million ($306.4 mm), up 3.2% over the comparable period last year.
Combined gross margin for the 13 weeks ended January 28, 2007 was 41.2% of revenue, compared to 37.9% in the previous year. The margin rate and dollar improvements were driven by considerably stronger corporate store results, supported by solid franchise and wholesale operations results.
Store operating expenses, as a percent of corporate store revenue, were 21.8% against the prior year of 21.5%. Same store operating costs were 20.9% of corporate store revenue, 20.4% in the prior year. Same store costs, in absolute dollars, increased CA$1.9 million or 3.5%. The overall store operating expense increase reflects the acquisition of 9 Fitness Source stores and the addition of 1 corporate store (net of closings).
General and administrative expenses were 9.8% of total revenue versus the prior year's 8.4%. The rate increase was attributable to the addition of the Fitness Source infrastructure and accruals for year-end, performance-based compensation offset, to a large extent, by a reduced marketing spend.
Earnings before interest, taxes and amortization (“EBITA”) were CA$46.9 million or 13.3% of revenues, compared to CA$38.9 million or 11.4% of revenues for the 13-week period last year.
Store Activity:
During the quarter, the company opened 3 Sport Chek stores and acquired 7 Nevada Bob's Golf stores from a former licensee. In addition, the company closed 1 National Sports store and 1 corporately owned Golf Experts store. In the franchise division, 5 stores were opened (1 Nevada Bob's Golf, 1 Sports Experts, 1 Atmosphere and 2 Intersport). As noted above, 7 Nevada Bob's Golf stores became corporate stores, and 3 new buying members were recruited. As a result, at the end of the fourth quarter, the company had 270 corporate stores and 209 franchise locations. The company now has 479 stores from coast to coast (January 29, 2006 – 464 stores).
For the first 7 weeks of the first quarter of the company's fiscal 2008 year, same store sales from corporate stores grew 1.9% and franchise same store sales increased 17.1% against prior year increases of 17.2% corporately and 4.2% for franchise stores for the same seven week period. Corporate margin expansion continues to outpace sales growth.
For the Year:
Diluted earnings per share for the 52-week period ended January 28, 2007 were $1.04, compared to $0.42 in the prior year, a 147.6% increase.
Retail system sales for the 52 weeks were $1,416.7 million, a $106.2 million increase from sales for the comparative fiscal 2006 year. Exclusive of the sales attributable to Fitness Source locations, retail system sales increased $85.0 million or 6.5%. Same store sales in corporate stores increased 5.9%, while franchise stores increased 4.4%, with total same store retail system sales increasing 5.4%.
Revenue was $1,264.0 million, an 11.9% increase over the 52-week period last year. Combined gross margin for the 52 weeks ended January 28, 2007 was up 180 basis points to 35.7% of revenue, from 33.9% in the prior year, driven primarily by strong corporate store margins.
Store operating expenses, as a percent of corporate revenue, were 25.6% versus 26.3% in the prior year. General and administrative expenses were 8.5% of total revenue versus 7.9% in the prior year. The absolute dollar increase in general and administrative expense spend was a result, primarily, of the addition of the Fitness Source infrastructure and accruals for performance-based compensation, offset by reduced spending in marketing.
EBITA was CA$107.3 million ($94.6 mm), or 8.5% of total revenue, compared to 6.1% for the same period last year. Earnings before income taxes for the 52 weeks ended January 28, 2007 were CA$56.5 million ($49.5 mm) compared to CA$21.7 million ($18.0 mm) for the prior year.
