Golf Galaxy, Inc. fiscal third quarter net sales increased 56.7% to $31.8 million, compared with $20.3 million for the same period of the prior year. Comparable store sales increased 6.7% for the fiscal third quarter, compared with an increase of 9.9% for the third quarter of fiscal 2005.

The company reported a net loss for the third quarter of $1.6 million, or a loss of 15 cents per diluted share, compared with its guidance for a net loss of $2.2 million to $1.8 million. The company typically reports a net loss in its fiscal third quarter, its lowest volume period due to seasonality. Golf Galaxy reported net income of $3.4 million, or 43 cents per diluted share, for third quarter fiscal 2005, which included a pre-tax gain of $8.4 million realized on the sale of its equity investment in Golf Town Canada Inc. stock. Excluding this one-time gain and giving effect to the conversion of preferred shares and the company's initial public offering as of the beginning of the third quarter of fiscal 2005, the company's pro-forma net loss would have been $1.7 million, or a loss of 16 cents per diluted share, for the quarter ended Nov. 27, 2004. A reconciliation of pro-forma earnings per share is provided in a table that follows.

“We are very pleased with our results in the third quarter. A slow start in September was more than offset by strong sales in October and November,” said Randy Zanatta, Golf Galaxy president, chief executive officer and chairman. “In addition, we were comparing against a strong quarter last year.”

Net sales for the nine months ended Nov. 26, 2005 increased 50.7 percent to $160.0 million, compared with $106.2 million for the same period of fiscal 2005. Comparable store sales increased 8.4 percent for the first nine months of fiscal 2006, compared with an increase of 7.1 percent for the same period of the prior year. Golf Galaxy reported net income of $5.5 million, or 58 cents per diluted share, for the first nine months of fiscal 2006, compared with net income of $8.0 million, or $1.04 per diluted share, for the nine months ended Nov. 27, 2004. Pro-forma diluted earnings per share for the nine months of fiscal 2006 increased 78.6 percent to 50 cents per diluted share, compared with 28 cents per diluted share for the nine months ended Nov. 27, 2004.

Golf Galaxy opened four new stores during its fiscal third quarter, including its first stores in the Denver, Omaha and Tulsa markets. The company also opened its third store in the Philadelphia market. Including the stores opened in the third quarter, Golf Galaxy has opened 15 new stores during the first nine months of fiscal 2006. As of Nov. 26, 2005, Golf Galaxy operated 49 stores in 23 states. The company said it plans to open one additional store during the current fiscal year, which ends Feb. 25, 2006.

Golf Galaxy plans to open 14 to 16 new stores during fiscal 2007. “We expect to continue our expansion and believe Golf Galaxy is well positioned to grow market share in a highly fragmented market,” said Zanatta.

The company said that for the fourth quarter of fiscal 2006:

  • Net sales are currently expected to be $40 million to $42 million, an
    increase of 49 percent to 57 percent over the fourth quarter of fiscal
    2005;

  • Comparable store sales are currently expected to increase in the mid
    single digits; and

  • The company currently expects a net loss of $900,000 to $600,000.

The company said that for full fiscal year 2006:

  • Sales are currently expected to be $200 million to $202 million, an
    increase of 50 percent to 52 percent over fiscal 2005;

  • Comparable store sales are currently expected to be a 6 percent to 8
    percent increase over the prior year, consistent with the company's
    previous guidance; and

  • Net income is currently expected to be $4.6 million to $4.9 million. 

  GOLF GALAXY, INC.
  CONDENSED STATEMENTS OF OPERATIONS - UNAUDITED
  (In Thousands, Except Share and Per Share Amounts)


                         Three Months Ended          Nine Months Ended
                            (Unaudited)                 (Unaudited)
                      November 26,  November 27,  November 26,  November 27,
                          2005          2004          2005          2004

  Net sales              $31,800      $20,281       $160,005       $106,240
  Cost of sales           23,915       15,192        111,822         74,713
  Gross profit             7,885        5,089         48,183         31,527
  Operating expenses:
    Store operating        7,594        4,793         29,299         18,892
    General and
     administrative        2,527        2,520          7,784          6,509
    Preopening               662          599          2,012          1,163
  (Loss) income from
   operations             (2,898)      (2,823)         9,088          4,963
  Other income                 -        8,410              -          8,410
  Interest income
  (expense), net             172           11            287            (21)
  (Loss) income before
   income taxes           (2,726)       5,598          9,375         13,352
  Income tax benefit
  (expense)                1,117       (2,247)        (3,844)        (5,363)
  Net (loss) income       (1,609)       3,351          5,531          7,989
  Less preferred stock
   dividends                   -         (937)        (1,721)        (2,757)
  Net (loss) income
   applicable to common
   shareholders          ($1,609)      $2,414         $3,810          5,232
  Net (loss) income
   per share:
    Basic                 ($0.15)       $1.30          $0.66          $2.81
    Diluted               ($0.15)       $0.43          $0.58          $1.04
  Weighted average
   number of shares
   outstanding:
    Basic             10,653,135    1,862,778      5,768,834      1,862,223
    Diluted           10,653,135    7,704,345      9,480,569      7,703,790