FGL Sports, which includes Sport Chek, is now expected to miss its ambitious growth goals for 2017 due to its sluggish sales through the second quarter, according to its parent, Canadian Tire Corp.
In October 2014, Canadian Tire set its three-year growth strategy and financial aspirations for fiscal years 2015 to 2017. The goal included retail sales annual growth over 9 percent at FGL Sports, which also includes Sports Experts, Atmosphere, PHL, National Sports, and Hockey Experts in Canada.
Canadian Tire said in its second-quarter financial statement, “In light of the recent sales results at FGL Sports, it is unlikely that their annual sales growth aspiration will be realized in 2017.”
In the second quarter, FGL Sports retail sales increased 3.7 percent, recovering from a 2.7 percent decline seen in the first quarter but far short of the high-single-digit growth goal. For the six-month period, retail sales at FGL Sports are ahead 2.6 percent.
For the second quarter, same-store sales increased 2.6 percent. Same-store sales at Sport Chek, its primary banner, were up 1.1 percent. In the first quarter, same-store sales were down 2.7 percent at FGL Sports and down 4.3 percent at Sport Chek.
Sport Chek said unseasonably cold weather in April and May hindered sales in spring/summer categories, while contributing to sales growth in the outerwear category. Licensed apparel performed well due to the participation of five Canadian teams in the NHL playoffs. FGL Sports also showed positive growth from various promotional events held throughout the quarter and growing e-commerce sales.
On a conference call with analysts, Stephen Wetmore, president and CEO of Canadian Tire, remarked that despite the modest gain, FGL Sports’ performance “was quite good given the weather we saw in the quarter.”
Wetmore also reiterated many of the comments he made after FGL Sports saw the slowdown in the first quarter. At the time, he noted that FGL Sports had completed its five-year plan 2 million square feet real estate expansion that was started soon after Canadian Tire acquired Forzani Group in 2011. Growth was expected to slow to some degree and the focus would shift more to driving profitability.
“Looking forward, I believe we have great potential for FGL and specifically Sport Chek that continued to deliver a strong growth and profitability as it now transitions out of a period of expansionary growth to a phase focused on generating higher returns from our existing assets,” said Wetmore. “FGL Sports will continue to play a critical role as our leader in digital marketing and our destination banner for millennials and achievers. As well, FGL will look to target a broader customer segment beyond the achievers by focusing on product adjacencies to complement core categories.”
He added that Duncan Fulton, president, FGL Sports, and his team “will also work on improving performance by implementing many of the operational efficiency initiatives we have successfully applied in other parts of the company.”
FGL Sports sales were $462.1 million in the second quarter. FGL Sports had 433 locations at the quarter’s end, including 196 Sport Chek locations, 68 Atmosphere, 68 Sports Experts and 101 under other names.
Photo courtesy Sport Chek