Golf Galaxy, Inc. issued a revised outlook for the first quarter ending May 27, 2006, and the fiscal year ending March 3, 2007.
Citing softness in its direct businesses, primarily its catalog and ecommerce operations, and a slower start to the spring season for its retail stores, the company said it now anticipates net sales of $82 million to $83 million for the first quarter of fiscal 2007. Golf Galaxy had previously expected net sales of $84 million to $88 million for the quarter. The company also announced that it now expects a comparable store sales gain of zero to two percent for the fiscal first quarter, on top of a 10.5 percent comparable store sales increase for the first quarter of the prior fiscal year. In addition, the company narrowed its estimate for first quarter net income to $2.2 million to $2.5 million (pending the final purchase price allocation of The GolfWorks acquisition), or 19 cents to 22 cents per diluted share assuming 11.6 million weighted average shares outstanding. The company's previous guidance for first quarter net income was $2.0 million to $2.5 million, or 17 cents to 22 cents per diluted share.
“Despite lower than anticipated sales, we expect to achieve our estimated net income for the quarter through expense management and a meaningful year-over-year improvement in the gross profit rate at our retail stores,” said Randy Zanatta, Golf Galaxy's president and chief executive officer. “The margin increase is being driven by strategic initiatives in certain product categories, including services and accessories, which has resulted in a favorable impact on the sales mix.”
Company lowers full year outlook for net sales; maintains diluted EPS
Based on its new outlook for the first quarter, the company also revised its guidance for the fiscal year ending March 3, 2007, a 53-week period. For the full year, the company now expects net sales of $300 million to $310 million, compared with its prior estimate of $305 million to $315 million. The company's new estimate for fiscal 2007 net sales assumes the opening of 14 to 16 new stores, of which 11 have been opened in the first quarter, and a comparable store sales gain of 5 percent to 7 percent. Golf Galaxy had previously announced an expected comparable store sales gain of 6 percent to 8 percent for fiscal 2007. The company reiterated its expectation for fiscal 2007 net income of $7.5 million to $8.1 million (pending the final purchase price allocation of The GolfWorks acquisition), or 65 cents to 70 cents per diluted share, assuming 11.6 million weighted average shares outstanding.
“Our new outlook for fiscal 2007 assumes that sales volumes in all of our channels return to levels consistent with our original expectations, expense leverage from cost containment and gross margin expansion. We expect the current sales trend to improve with our highest volume months ahead of us and easier comparable store sales comparisons over the balance of the fiscal year,” Zanatta continued.