Galyans reported a net loss of $4.5 million, or a loss of 26 cents per diluted share, for the first quarter of fiscal 2004, compared to a net loss of $2.6 million, or 15 cents per diluted share, in Q1 last year. The first quarter of fiscal 2004 included net loss of five cents per diluted share for expenses associated with the resignation of Bob Mang, Galyans former COB/CEO.
Net sales for the first quarter of fiscal 2004 rose 21.7% to $157.7 million, from the $129.6 million reported in the same quarter last year. Comparable store sales decreased 1.4% primarily due to weaker results in the outdoor equipment, outdoor apparel and accessories categories, which were partially offset by stronger results in athletic equipment, athletic apparel and footwear.
Gross margin as a percentage of sales improved to 27.3 percent for the first quarter of fiscal 2004 versus 26.0 percent in the first quarter last year. The increase in gross margin was primarily due to a higher adjustment for EITF 02-16 and leveraging of distribution cost versus fiscal 2003.
Selling, general and administrative expenses as a percent of sales for the first quarter of fiscal 2004 increased to 31.4 percent from 28.9 percent in the first quarter last year. This increase was primarily from expenses associated with the resignation of Galyans' former CEO and Chairman of the Company, increased marketing and depreciation costs and higher pre-opening expenses, as the Company opened four stores during the first quarter of fiscal 2004 versus two in the year ago quarter.
Edwin J. Holman, Chief Executive Officer of the Company, commented, “We continue to work toward positive comp store growth and posted marked improvements over the third and fourth quarters of fiscal 2003. We are extremely pleased to have Rick Leto joining Galyans as our new President and Chief Merchandising Officer. With Rick's extensive merchandise and marketing background, he will be instrumental in enhancing our store merchandising and marketing strategies and execution.”
During the first quarter of fiscal 2004, the Company opened new stores in Hoover (Birmingham), AL; Middleton (Madison), WI; Virginia Beach, VA and Lakewood (Denver), CO. The addition of these four stores brings the total stores in operation to 47, compared to the 36 stores at this time last year.
Galyans has signed leases for the remaining five new store locations expected to be opened in fiscal 2004: one additional store bringing the total to seven stores in the Chicago market; the second store in the Cleveland market; Freehold, New Jersey the Company's third store in the New York metropolitan area, Charlotte, North Carolina and a replacement store in Galyans' home market of Indianapolis.
The Company 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.
Galyans anticipates adequate liquidity under its credit facility for fiscal year 2004 to fund its growth, including capital and inventory for new stores. Cash flow from operations for fiscal year 2004 is estimated to be sufficient for the Company to meet all working capital and fixed capital needs without increasing the debt level at the end of fiscal 2004 versus fiscal 2003.
Mr. Holman concluded, “We are making progress on all of our 2004 initiatives. Our SKU rationalization program has reduced our comp store inventories which has contributed to improved inventory turnover. Our marketing efforts have offered customers promotional incentives and our 'Titanium-Clad Guarantee' insures that we remain price competitive everyday in the marketplace. As we have previously stated, fiscal 2004 is a transition year for Galyans and we are on schedule to meet our strategic objectives.”
Galyan's Trading Company, Inc. Consolidated Statements of Operations For the Three Months Ended May 1, 2004, and May 3, 2003 (dollars in thousands, except per share data) May 1, May 3, 2004 2003 -------------- -------------- (unaudited) Net sales $157,661 $129,564 Cost of sales 114,668 95,920 -------------- -------------- Gross profit 42,993 33,644 Selling, general and administrative expenses 49,434 37,476 -------------- -------------- Operating loss (6,441) (3,832) Interest expense 1,054 467 Interest income (81) (22) -------------- -------------- Loss before income tax benefit (7,414) (4,277) Income tax benefit (2,936) (1,711) -------------- -------------- Net loss $(4,478) $(2,566) ============== ============== Basic and diluted loss per share $(0.26) $(0.15)