Golf Galaxy net sales for the second quarter of fiscal 2006 increased 46.5% to $69.6 million, compared to $47.5 million in the same period of the prior year. The company reported net income for the quarter of $5.4 million, or 59 cents per diluted share on a GAAP basis, compared with net income of $3.5 million, or 46 cents per diluted share on a GAAP basis, in the second quarter of the prior year.

Giving effect to the conversion of preferred shares and the company's initial public offering as of the beginning of each period presented, pro-forma diluted earnings per share in the second quarter of fiscal 2006 increased 48.5% to 49 cents, compared with pro-forma diluted earnings per share of 33 cents in the second quarter of fiscal 2005. A reconciliation of pro-forma earnings per share is provided in a table that follows.

Comparable store sales increased 7.4% for the second quarter of fiscal 2006 compared to an increase of 5.9% for the second quarter of fiscal 2005. The company considers a store to become comparable in its 13th full month of operations.

Net sales for the six months ended Aug. 27, 2005 increased 49.1% to $128.2 million, compared with $86.0 million in the 2005 fiscal period. Golf Galaxy reported net income of $7.1 million, or 83 cents per diluted share on a GAAP basis, for the six months ended Aug. 27, 2005, compared with net income of $4.6 million, or 60 cents per diluted share on a GAAP basis, for the first six months of the prior fiscal year. Pro-forma diluted earnings per share for the six months of fiscal 2006 increased 48.8 percent to 64 cents, compared to 43 cents per diluted share for the six months ended Aug. 28, 2004. Comparable store sales increased 8.8 percent in the first six-months of fiscal 2006, compared to an increase of 6.6 percent in the same period of fiscal 2005.

“We are pleased with our results in the second quarter, which is our most important quarter from both a sales and profit standpoint,” said Randy Zanatta, president, chief executive officer and chairman. “We not only achieved strong sales and earnings in the quarter, but also completed our initial public offering. We believe this demonstrates the capacity of the company and the depth of the Golf Galaxy team.”

Golf Galaxy opened 11 new stores in the first six months of the fiscal year. At the end of second quarter fiscal 2006 Golf Galaxy operated 45 stores in 19 states.

On Aug. 3, 2005, Golf Galaxy completed its initial public offering of 4,542,500 shares of common stock, of which 3,000,000 were offered by the company, at a price of $14.00 per share. As part of the offering, existing preferred stock was converted to common stock and a portion of the proceeds of the offering was used to pay accumulated dividends to preferred shareholders.

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

  • Sales are currently expected to be $30 million to $32 million, an
    increase of 48 percent to 58 percent over the third quarter of fiscal
    2005;

  • Comparable store sales are currently expected to increase 2 percent to
    6 percent; and

  • The company currently expects a net loss of $2.2 million to
    $1.8 million.

The company further said that for fiscal 2006:

  • Sales are currently expected to be $197 million to $202 million, an
    increase of 48 percent to 52 percent over fiscal 2005;

  • Comparable store sales are currently expected to increase 6 percent to
    8 percent;

  • Net income is currently expected to be $4.5 million to $5.1 million;
    and

  • The company remains on track to open 16 new stores in the current
    fiscal year, having recently announced four stores to be opened in
    November 2005.

Golf Galaxy said that sales were negatively affected in the weeks following Hurricane Katrina. Furthermore, higher gasoline and energy prices are resulting in higher freight costs and utilities expenses at the company's stores, and may impact consumer spending. The company's outlook for fiscal 2006 reflects the company's best estimates at this time of the anticipated impact of these events on its future results.

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

                           Three Months Ended         Six Months Ended
                               (Unaudited)               (Unaudited)
                          August 27,   August 28,   August 27,   August 28,
                             2005         2004         2005         2004
    Net sales              $69,635      $47,540     $128,205      $85,959
    Cost of sales           47,565       32,665       87,907       59,521
    Gross profit            22,070       14,875       40,298       26,438
    Operating expenses:
      Store operating       10,773        7,127       21,705       14,099
      General and
       administrative        2,155        1,842        5,257        3,989
      Preopening                40           46        1,350          564
    Income from operations   9,102        5,860       11,986        7,786
    Interest income
     (expense), net            100            4          115          (32)
    Income before income
     taxes                   9,202        5,864       12,101        7,754
    Income tax expense      (3,755)      (2,351)      (4,961)      (3,116)
    Net income               5,447        3,513        7,140        4,638
    Less preferred stock
     dividends                (723)        (919)      (1,721)      (1,820)
    Net income applicable
     to common shareholders $4,724       $2,594       $5,419       $2,818
    Net income per share:
      Basic                  $0.98        $1.39        $1.62        $1.51
      Diluted                $0.59        $0.46        $0.83        $0.60
    Weighted average
     number of shares
     outstanding:
      Basic              4,801,458    1,861,945    3,342,714    1,861,945
      Diluted            9,211,662    7,703,512    8,634,726    7,703,512