The Forzani Group Ltd. announced its 6th consecutive year of record results and a milestone achievement of over $1 billion in retail system sales.
For the fiscal year ended February 2nd, 2003, retail system sales (corporate and franchised stores) increased 20.2% to $1.053 billion compared with $876.4 million for the year ended January 27th, 2002. In the fourth quarter, retail system sales increased 16.1% to $362.5 million.
Revenue for fiscal 2003, which consists of corporate retail system sales and wholesale sales to franchisees, was $923.8 million, a 21.8% increase over the previous year. Both the corporate and franchise businesses reported significant revenue growth. Measured on a comparable store basis, sales at corporate stores increased 4.9% and franchise store sales grew by an outstanding 11.5%. In the fourth quarter, revenue increased 15.5% to $283.8 million, and corporate and franchise comparable store sales increased 2.7% and 18.2%, respectively.
Gross margin for the year increased 30 basis points over fiscal 2002 to 34.7%, resulting in an EBITDA (earnings before interest, taxes, depreciation and amortization) margin improvement to 9.0%, an 80 basis point increase over the prior year. For the fourth quarter, EBITDA margin increased 50 basis points to 11.6%, versus 11.1% last year.
Net earnings for the year were $30.5 million up 48% from reported net earnings of $20.6 million in fiscal 2002. Earnings per share were $1.01, a 32.9% increase, versus $0.76 per share in the previous year. For the fourth quarter of fiscal 2003, the Company reports net earnings of $14.0 million, a 27.8% increase over the prior year. Earnings per share for the fourth quarter were $0.46, compared to $0.40 per share for the same period last year.
Commenting on the Company’s results, Bob Sartor, Chief Executive Officer, stated, “Fiscal 2003 was another record-setting year for the Company. Particularly significant is the key milestone reached of over $1 billion in retail system sales. It should be noted that our EPS growth was achieved on a larger share base than in the prior year, due to the Company’s 2.5 million share issuance in March, 2002. The results for the fourth quarter were below our earlier expectations, but still very satisfactory, given the poor weather conditions experienced in Western Canada during almost all of the quarter.”
During fiscal 2003, the Company opened 38 new corporate stores, 17 of which were opened during the fourth quarter. Also, during fiscal 2003, the franchise division opened 13 new franchise stores, 3 of which were opened in the fourth quarter. This growth translates to an additional 710,700 square feet of retail space, an increase of 19.7% over the previous year. The Company now has over 4.3 million square feet of retail selling space from coast to coast.
For the first five weeks of Q1, fiscal 2004, comparable store sales from corporate stores decreased by 1.9% and franchise comparable store sales increased 17.6%.
Comparable store sales in corporate stores were negatively impacted as last year’s sales included strong Olympic clothing and accessory sales, particularly after the dual, gold medal hockey victories. In Western Canada, and in particular British Columbia, sales continued to be adversely affected by poor weather.
Looking ahead, management remains confident as it continues to focus on its proven strategies for success. Management’s earnings per share guidance for fiscal 2004 is in the range of $1.35 to $1.45.
THE FORZANI GROUP LTD.
Consolidated Statements of Operations and Retained Earnings
(in thousands, except share data)
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For the For the
53 weeks 52 weeks
ended ended
February 2, January 27,
2003 2002
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Corporate and Franchise Retail Sales $ 1,053,449 $ 876,434
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Revenue
Corporate $ 715,003 $ 579,196
Franchise 208,792 179,061
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923,795 758,257
Cost of sales 603,326 497,758
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Gross margin 320,469 260,499
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Operating and administrative expenses
Store operating 177,252 142,788
General and administrative 60,230 55,215
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237,482 198,003
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Operating earnings before undernoted
items 82,987 62,496
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Amortization 29,624 22,574
Interest 4,354 4,901
Gain on sale of investments (1,454) -
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32,524 27,475
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Earnings before income taxes 50,463 35,021
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Provision for (recovery of) income taxes
Current 22,133 6,434
Future (2,201) 7,958
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19,932 14,392
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Net earnings 30,531 20,629
