Galyan’s Trading Company was the lone comp sales decliner so far in our review of sporting goods retail results, but the 1.4% decrease slowed a bit from recent quarterly results, coming on top of a 6.3% comp sales decrease in Q1 last year. The comp sales decline, along with an increase in SG&A expenses, offset an improvement in gross margin, netting a 73% increase in the loss for the fiscal first quarter. Still, the market appeared to signal a positive response to the long-term strategy as GLYN shares finished up 3.3% for the week to close at $8.96 on Friday.

The gross margin increase was due primarily to a shift in accounting rules that “requires consideration given by a vendor to a customer to be characterized as a reduction of revenue” that netted 60 basis points of the gain. The DC contributed 40 basis points in GM improvement and IMU was up 20 basis points. The increase in SG&A was said to be due primarily to the exit costs associated with former COB/CEO Bob Mang’s departure. Mang’s “resignation” added $1.5 million to the SG&A line, costing the company five cents per share in the EPS line. Earnings per share would have declined 40% excluding the Mang costs.

The comp store sales decrease was said to be primarily due to “weaker results in the outdoor equipment, outdoor apparel and accessories categories”, partially offset by stronger results in “athletic equipment, athletic apparel and footwear”.

The outdoor equipment category was seen as “challenging”, but GLYN said they cleaned up aged inventory that is now within aging standards. New CEO Ed Holman said they are “probably a quarter or two away” from having the business back on track. He said they see an ability to drive outdoor equipment in hunt/fish/camp, but doesn’t see it happening “for another quarter”.

Holman also the casual apparel category “also needs work” and will not be back on track until “the back half of the year”. He said the category has the potential to “be a home run” on a long-term basis…

The average ticket was $57.64, “down slightly from last year”, while average unit retail was up 2.4% to $22.37 and units per transaction were down 2.7%.

While inventory rose 3.1%, the retailer’s activities to reduce inventory exposure was quite evident as inventory levels were reported down 14.9% on comp store basis. Gross square feet was up 30.6%. New store productivity was 81% for the period.

GLYN anticipates capital expenditures for fiscal year 2004 in the range of approximately $36 to $40 million, as compared to $77 million in fiscal year 2003. The reduction in capital expenditures is primarily due to all of the 2004 store openings having landlord financing as compared to only six of the nine stores which had landlord financing in fiscal 2003.

>>> We guess one has to ask how much it would have cost if he had stayed…