Golfsmith saw “weakness across the board in December” lead to widened net losses for both the fourth quarter and full fiscal year as the golf retailer continues to do battle with increased competition, mainly in the form of the PGA Tour Superstores. A goodwill impairment charge exaggerated the bottom line decreases, but the company is hesitant looking at 2008, planning to open only one new store during the fiscal year compared to the 13 opened in 2007.
For the fourth quarter of fiscal 2007, GOLF reported net revenues of $79.0 million, increasing 5.3% from $75.0 million for the fourth quarter of fiscal 2006. The new store openings drove the sales growth as comparable store sales decreased 4.6% for the quarter and direct-to-consumer sales declined 6.7%. Management said on a conference call with analysts that it had cut back its catalog circulation by 18% in the quarter meaning that there was actually a better sales conversion rate for the segment. By month, sales were up in October and November, but decreased 9.6% in December.
As far as product categories, the company said that private label clubs, pro-line clubs, grips, technology and tennis all out-performed the overall company average, but categories like club-making, pre-owned clubs and consumables trailed the overall company. Apparel sales were said to be up 9% on an 11% decrease in comp inventory.
Gross margins for the fourth quarter improved 30 basis points to 34.9% of net sales from 34.6% for the same period last year, mainly due to a favorable merchandise mix, as well as improved shrink results for the quarter, which was largely a result of timing of fiscal inventory counts. However, SG&A expenses rose by 280 basis points for the fourth quarter to 37.8% of net revenue, driven by expenses associated with 13 store openings, consulting fees and de-leveraging resulting from negative comparable-store sales.
The company also recorded a $43 million non-cash impairment of goodwill, associated with a decline in market capitalization and long-lived assets related to three stores. This resulted in an operating loss of $45.6 million in the fourth quarter of fiscal 2007, compared with an operating loss of $0.6 million for the same period of fiscal '06.
The net loss totaled $46.7 million, or $2.95 per share, for the quarter. This compares with a net loss of $1.6 million, or 10 cents per share, in Q4 2006. Excluding the $43 million charge, the loss per share was 23 cents versus a loss of 10 cents for the same period last year.
In 2008, total revenue growth is expected to be flat-to-slightly-positive with flat-to-negative low-single-digit comparable-store sales results and a decrease in sales from the direct business. The first quarter will be impacted by approximately $1.6 million, or 10 cents per share, due to the ongoing search for a new CEO. Interim CEO Martin Hanaka commented that they would ideally like to have someone in place by April 1, but realistically expect to have a new CEO named by the companys annual meeting on May 6, 2008.
The single new store the company plans to open in 2008 will be in the Bay Area in California and will serve as a replacement for three smaller stores, two of which are already closed. The final store is scheduled to close in the third quarter, when the new larger store will open. The new store will provide a net gain of approximately 5,000 square feet for the region, though it will be approximately 25,000 to 30,000 square feet and not in the 59,000 square foot, big box footprint the company launched in Raleigh, NC in 2007.
