The Forzani Group Ltd. retail system sales for the quarter ended January 29, 2006, were $438.0 million, a $71.4 million increase from sales for the quarter ended January 30, 2005, of $366.6 million, on the strength of a 10.1% increase in corporate comparable store sales; a 5.3% increase in franchise comparable store sales; and sales stemming from the acquisition of National Gym Clothing Limited (“National Sports”) on January 31, 2005, and the full year impact of the Nevada Bob's Golf banner/license acquisition at the end of fiscal 2005. Excluding the impact of the two new banners, retail system sales for the fourth quarter were $407.1 million, an 11.0% increase over sales in the same period last year.
Net earnings for the quarter were $17.0 million, or 5.0% of revenues versus $12.7 million or 4.6% in the prior year. Basic earnings per share for the 13-week period ended January 29, 2006 were $0.52 compared to $0.39 in the prior year. Diluted earnings per share were $0.51, a record fourth quarter for the Company, versus $0.39 in the fourth quarter of fiscal 2005. Cash flow from operations increased to $27.4 million from $20.5 million. On a per share basis, cash flow increased to $0.83 from $0.63 in the prior year.
Total revenues, consisting of corporate store sales, wholesale sales, service income, equipment rentals, franchise fees and franchise royalties, were $342.2 million, an increase of 24.8% from the prior year. Exclusive of the impact of National Sports and Nevada Bob's Golf, revenues increased to $316.1 million or 15.2% over last year's fourth quarter.
Corporate store revenues, at $287.8 million, were 25.4% above last year's revenues of $229.5 million, a combination of the impact of the National Sports stores acquired earlier in the year, the net addition of 9 corporate stores and the comparable store sales increases of 10.1% referred to above. Corporate comparable store sales were driven by stronger than expected results in footwear, hockey and athletic clothing.
Wholesale sales for the quarter were $54.4 million, up 21.4% from the prior year. Franchise comparable store sales were up 5.3% for the quarter on the strength of footwear, athletic and winter clothing.
The Company's margins for the quarter were 37.9%, up 50 basis points from the prior year mark of 37.4%. This was primarily due to the strength of improved corporate store results, particularly in the hockey equipment, athletic/casual/outdoor clothing, and footwear categories. In absolute dollars, combined gross margin increased $27.2 million to $129.7 million compared to $102.5 million in the 13-week period last year.
Corporate store operating expenses, as a percent of retail revenue, decreased to 21.5% this year versus 23.2% in the prior year. On a comparable store basis, store-operating expenses were 20.1% of revenue against 22.0% last year.
General and administrative expenses were 8.4% of total revenue at $28.8 million versus $18.4 million in the prior year. The difference of $10.4 million, in addition to ordinary course increases, was comprised of: central costs related to National Sports ($2.1 million); an increased media spend ($3.1 million); the addition of a Precision Retail Group ($0.7 million); and a variance in stock-based compensation expense, in the quarter, as a result of a forfeiture of stock options in fiscal 2005 ($2.5 million). Exclusive of these costs, general and administrative expenses represented 6.4% of revenues, more in line with historical levels.
During the quarter, the Company opened 5 Sport Chek stores, 1 Sport Mart store and 2 National Sports stores. In addition, the Company closed 3 Sport Chek stores and 2 Sport Mart stores, and 1 franchise store was converted to a corporate store. In the franchise division, 10 stores were opened (6 Nevada Bob's Golf, 1 Sports Experts, 1 Pegasus, 1 Hockey Experts and 1 Atmosphere), 2 Intersport stores and 1 Nevada Bob's Golf store closed, and 1 franchise store became a corporate store. As a result, at the end of the fourth quarter, the Company had 260 corporate stores and 204 franchise locations. This was a net increase of 74,700 square feet of retail selling space, a 1.3% increase versus the previous quarter. The Company now has 464 stores from coast to coast (January 30, 2005 – 427 stores).
Retail system sales for the 52 weeks ended January 29, 2006 were $1,310.5 million, a $202.2 million increase from sales for the 52 weeks ended January 30, 2005. This increase was a combination of comparable store sales increases of 3.8% and 6.5% in corporate and franchise stores, respectively, and the sales resulting from the acquisition of National Sports in the first quarter of fiscal 2006 and the full-year impact of the addition of Nevada Bob's Golf. Excluding the impact of these two new banners, retail system sales for fiscal 2006 were $1,190.3 million, a 7.4% increase over sales in the same period last year.
Revenue was $1,129.4 million, a $144.3 million, or 14.6% increase over the 52-week period last year. Exclusive of the impact of National Sports and Nevada Bob's Golf, revenue increased to $1,040.5 million, or 5.6% over the prior year.
Combined gross margin for the 52 weeks ended January 29, 2006 was 33.9% of revenue, consistent with the prior year. In absolute dollars, the combined gross margin increased $49.2 million, to $383.1 million, from the 52-week period last year.
Store operating expenses, as a percent of retail revenue, were 26.3% versus 26.6% in the prior year. On a comparable store basis, store-operating expenses were up 0.8% in absolute dollars versus the prior year, but down 50 basis points as a percent of retail revenue.
General and administrative expenses were $88.7 million, or 7.9% of total revenue, versus $66.5 million or 6.8% in the prior year. Similar to the quarter, the increase in absolute dollars over and above ordinary course increases, is primarily a result of: the addition of National Sports, representing $7.7 million; and increase in the Company's advertising spend of $6.0 million; the full-year cost of a Precision Retailing Group, in the amount of $1.2 million, and the year over year variance in stock-based compensation expense as a result of a forfeiture of stock options in fiscal 2005, representing $1.3 million.
Net earnings for the 52 weeks ended January 29, 2006 were $13.8 million compared to $21.5 million for the 52-week period in the prior year. Basic and diluted earnings per share were $0.42, compared to $0.66 in the prior year. Cash flow from operations decreased from $56.8 million to $47.8 million. On a per share basis, cash flow decreased 16.7% to $1.45 compared to $1.74 the prior year.
“The weak results in the Company's first two quarters of fiscal 2006 made for a difficult year. We are encouraged, however, by the operational changes made in the Company which resulted in strong results in the back half of the year, with diluted earnings per share for the combined third and fourth quarters of $0.71, a 24.6% improvement over fiscal 2005. Commencing with the Back to School period and carrying through a record fourth quarter, the Company has regained its momentum moving into fiscal 2007. For the first seven weeks of Q1, fiscal 2007, comparable store sales from corporate stores grew by 17.2% and franchise comparable store sales increased 4.2 %.”
THE FORZANI GROUP LTD. Consolidated Statements of Operations and Retained Earnings (in thousands, except share data)
------------------------------------------------------------------------ For the For the 52 weeks 52 weeks ended ended January 29, January 30, 2006 2005 ------------------------------------------------------------------------
Revenue Retail $ 856,149 $ 718,820 Wholesale 273,255 266,234 ------------------------------------------------------------------------ 1,129,404 985,054 Cost of sales 746,313 651,158 ------------------------------------------------------------------------
Gross margin 383,091 333,896 ------------------------------------------------------------------------
Operating and administrative expenses Store operating 225,218 190,891 General and administrative 88,720 66,536 ------------------------------------------------------------------------ 313,938 257,427 ------------------------------------------------------------------------
Operating earnings before undernoted items 69,153 76,469 ------------------------------------------------------------------------
Amortization 41,343 35,885 Interest 6,145 4,447 Loss on write-down of investment - 2,208 ------------------------------------------------------------------------ 47,488 42,540 ------------------------------------------------------------------------
Earnings before income taxes 21,665 33,929 ------------------------------------------------------------------------
Provision for income taxes Current 8,784 10,207 Future (876) 2,177 ------------------------------------------------------------------------ 7,908 12,384 ------------------------------------------------------------------------
Net earnings 13,757 21,545
Retained earnings, opening 122,121 101,528 Adjustment arising from normal course issuer bid - (952) ------------------------------------------------------------------------ Retained earnings, closing $ 135,878 $ 122,121 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Earnings per share $ 0.42 $ 0.66 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Diluted earnings per share $ 0.42 $ 0.66 ------------------------------------------------------------------------
