Sport Chalet Inc. reported a loss of $5.7 million, or 40 cents a share, in its fiscal fourth quarter ended Mar. 30, approximately double the loss of $2.3 million logged in the year-ago quarter, according to its 10K filing with the Securities & Exchange Commission.
Sales in the period declined 8.9 percent to $80.0 million. Gross margins eroded to 24.0 percent from 27.0 percent.
For the full year, the loss was $10.1 million, or 71 cents a share, compared to a loss of $3.3 million, or 34 cents, a year ago. Revenues were down 4.8 percent to $343.5 million.
The decrease in sales for the year was primarily due to a comparable store sales decrease of $10.1 million, or 3.1 percent, and a sales decrease of $8.6 million from the closure of four underperforming stores. Sales in its Team Sales Division also slid $3.1 million, or 21.0 percent, due to the departure and recent replacement of several sales representatives, as well as the impact of Action Pass redemption activity.
Those declines were only partially offset by an increase of $2.1 million, or 30.2 percent, in online sales and sales from the one new concept store. In June 2103, Sport Chalet opened a “next generation” store in in downtown Los Angeles. The 27,300 square foot store incorporates a new design template featuring enhanced displays, fixtures, and graphics designed to position Sport Chalet “as a destination for premium brands, technical merchandise and high quality service offerings.”
The 3.1 percent same-store decline was primarily due to the unseasonably warm and dry winter weather experienced in the second half of fiscal 2014 as well as a weaker-than-anticipated retail sales environment. The filing noted that winter-related merchandise and services represent approximately 12% of its annual sales and have ranged from approximately 15% to 25% of sales in its fiscal fourth quarter.
Sale per square feet was $155, down $163 a year ago.
Gross profit decreased $8.3 million, or 8.4 percent, and as a percent of sales decreased to 26.5 percent from 27.5 percent. The decrease in gross profit is primarily the result of the decrease in sales as well as an increase in promotional activity to stimulate sales. Occupancy costs related to the new store were offset by the savings from the store closures.
SG&A expenses decreased $1.2 million, or 1.3 percent. The decrease is primarily due to a decrease of $1.3 million in labor to align with sales trends. As a percent of sales, SG&A increased to 26.4 percent of sales from 25.5 percent due to the decline in sales.
The filing noted as a result of its continued losses and its desire to strengthen its financial position and liquidity, on June 27, it entered into a term loan credit facility with Crystal Financial SBIC LP for advances up to $15 million. The facility is structured in conjunction with its existing lender's revolving credit facility for a total combined facility of $90 million and is secured by a second security position on all its assets and capital stock in its subsidiaries. In June, Sport Chalet also entered into a third amendment to its October 2010 amended and restated credit facility with Bank of America.
Sport Chalet closed four existing stores located in Antioch and Concord, CA and Phoenix and Tempe, AZ, ending the year with 51 locations. In June 2014, it closed its Henderson, Nevada in June 2014.
The report noted that Sport Chalet has over 2.5 million Action Pass members, whose purchases represent over half of all its sales. Nike was its largest vendor, representing 12 percent of its sales. Its ten largest vendors collectively accounted for approximately 40 percent of its total inventory purchases during fiscal 2014.
