The Forzani Group Ltd. net earnings for the first quarter were $700,000, or two cents per share, compared to the prior year's first quarter of $300,000, or one penny per share. Net earnings included the effect of a one-time loss of $900,000 on the sale of an investment in a trademark licensing company. Excluding this item, earnings were $1.3 million or four cents per share.

[Editor's note: all results are reported in Canadian dollars]
Retail system sales for the quarter were $308.4 million, an increase of $9.3 million, or 3.1% from the comparable 13-week sales of $299.1 million. The increase was due to strong contributions from franchise stores as corporate store sales were flat with the prior year.

Same store sales in corporate locations were up 0.4% in the quarter and, in franchise, up 9.6% over the fiscal 2007 first quarter. These results were up against strong same store increases of 12.2% and 6.0% respectively in the prior year.

Revenue, consisting of corporate store sales, wholesale sales, service income, equipment rentals, franchise fees and franchise royalties, was $294.6 million, up $14.2 million, or 5.1% over the comparable period last year.

Combined gross margin for the 13 weeks ended April 29, 2007 was 33.3% of revenue, or $98.0 million, compared to 32.1%, or $90.1 million in the previous year. The margin rate and dollar improvements were driven by a combination of continued, solid franchise results, and improved corporate store results. Corporate store category sales results were mixed with solid performance in winter categories, particularly hockey and team sports, outerwear, casual clothing and footwear. Spring category performance, particularly in golf and inline skate categories lagged due to unseasonably cool weather. Margin rate performance continued to post strong year over year gains in corporate stores.

Store operating expenses, as a percent of corporate store revenue, were 29.6% against the prior year of 29.5% . In absolute dollars, store operating expenses fell $0.2 million. The overall store operating expense decrease reflects the closing/franchising, in the past year, of 8 corporate stores (net of openings), specifically the franchising of 9 Fitness Source stores, acquired in January 2006, which were franchised in April 2007. Same store operating costs were 27.9% of corporate store revenues versus 28.1% in the prior year. Same store costs, in absolute dollars, decreased $0.4 million or 0.8%.

General and administrative expenses were 8.8% of total revenue versus the prior year's 7.0% . The absolute dollar increase of $6.4 million was a combination of standard year over year increases and the timing of accruals for anticipated year-end, performance-based compensation. In fiscal 2007, first quarter accruals for performance-based compensation were minimal as there was uncertainty with regard to the attainment of targets. Management is of the opinion that performance targets will be attained in fiscal 2008 and has accrued compensation expenses accordingly. As mentioned in the Company's fiscal 2007 year end conference call, year over year performance based compensation is expected to be approximately $10 million less in fiscal 2008 versus fiscal 2007 which will result in an annualized general and administrative expense run rate in line with historical rates. These reduced expenses will be in the third and fourth quarters of the year. Earnings before interest, taxes, loss on sale of investment, and amortization (“EBITA”) were $14.5 million, a 13.3% improvement over the prior year's EBITA of $12.8 million.

During the quarter, the Company opened 1 Sport Chek store, franchised 9 Fitness Source and 1 Nevada Bob's Golf stores and closed 3 Sport Mart and 3 Sport Chek stores. In the franchise division, 5 new stores were opened (1 Atmosphere, 3 Nevada Bob's Golf and 1 Hockey Experts), 1 store converted from Intersport to Econosport, and 1 Nevada Bob's Golf store closed. Additionally, 10 corporately owned stores (9 Fitness Source and 1 Nevada Bob's Golf) were franchised. As a result, at the end of the first quarter, the Company had 255 corporate stores and 223 franchise locations. This was a net decrease of 18,804 square feet of retail selling space, a 0.3% decrease versus the previous quarter. The Company now has 478 stores from coast to coast (April 30, 2006 – 471 stores).

The Company's working capital surplus of $168.6 million grew by 48.5% over the prior year due to stronger results which reduced debt levels more than offsetting increased investment in inventory and receivables to support growth. During the quarter, the Company purchased 360,800 Common Shares at a cost of $7,555,000 under its outstanding Normal Course Issued Bid.

Management's Comments:

The Company's first quarter of fiscal 2008 continues the strength exhibited in the results of the fiscal 2007 year. Franchise operations continue to perform to plan and, corporate stores matched their record first quarter sales results from 2007 while continuing the trend of higher margins due to better assortment planning and replenishment. Store operating expenses are in line with historical rates. General and administrative expenses, though ahead of the prior year, will be less than fiscal 2007 on a full year basis. Operationally, exclusive of the impact of the one-time loss on the sale of an investment and the effect of the timing of accruals for performance-based compensation, earnings are substantially improved over the first quarter of fiscal 2007, representing a strong start to the current year's results. It should be noted that the licences held as a result of the original investment in a trademark licensing company have been, and continue to be highly profitable for the Company.

For the first four weeks of Q2, fiscal 2008, same store sales from corporate stores grew by 4.5% and franchise comparable store sales increased 14.6%, with strong margins.




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                                     For the 13 Weeks ended
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                                  April 29, 2007 April 30, 2006
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Same Store Sales


 Corporate                                   0.4%          12.2%
 Franchise                                   9.6%           6.0%
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 Consolidated                                3.5%          10.0%
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Revenue ($000s)
 Retail                                  194,195        195,855
 Wholesale                               100,363         84,579
                                  ------------------------------
 Total                                   294,558        280,434
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EBITA Margin                                 4.9%           4.6%
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Net Earnings ($000's)                        739            294
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Earnings per Share (prior to loss
 on sale of investment)                    $0.04          $0.01
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Earnings Per Share                         $0.02          $0.01
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