Golf Galaxy Sees Positive Comps and Expansion Drive Q2 Income Up

Golf Galaxy, Inc. net sales for the second quarter of fiscal 2007 increased 37.4% to $95.6 million, compared with $69.6 million for the same period of the prior year. Comparable store sales increased 0.8% for the fiscal second quarter, compared to an increase of 7.4% for the second quarter of fiscal 2006. The current quarter marked the company's fourteenth consecutive quarter of comparable store sales increases.

The company reported net income for the second quarter of $7.0 million, or 61 cents per diluted share, compared to net income of $5.4 million, or 59 cents per diluted share, for the second quarter of fiscal 2006. Giving effect to the conversion of preferred shares and the company's initial public offering as of the beginning of fiscal 2006, the company's pro-forma diluted earnings per share for the second quarter of fiscal 2006 would have been 49 cents. A reconciliation of pro-forma net income and earnings per share is provided in a table that follows.

“Thanks to outstanding execution by our employees, we produced solid earnings performance this quarter despite a more cautious consumer environment,” said Randy Zanatta, Golf Galaxy's president and chief executive officer. “Our improvement in gross margins, effective inventory management and diligent expense control demonstrates the depth of our management teams and the strength of our operating model. We are pleased to see a strengthening of our sales trend which began in mid-August and has continued into September.”

Net sales for the six months ended Aug. 26, 2006 increased 39.0 percent to $178.2 million, compared with $128.2 million in the 2006 fiscal period. Golf Galaxy reported net income of $9.6 million, or 83 cents per diluted share for the six months ended Aug. 26, 2006, compared with net income of $7.1 million, or 83 cents per diluted share, for the six months ended Aug. 27, 2005. Pro-forma diluted earnings per share were 64 cents for the six months of fiscal 2006. Comparable store sales increased 0.9 percent in the first six months of fiscal 2007, compared to an increase of 8.8 percent in the same period of fiscal 2006.

The company said that for the third quarter ending Nov. 25, 2006:

• Net sales are currently expected to be $45 million to $50 million, an
  increase of 42 percent to 57 percent over the third quarter of fiscal
  2006;

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

• The company currently expects a net loss of $2.7 million to $2.3
  million, or 25 cents to 21 cents per diluted share (assuming 11.0
  million weighted average shares outstanding). The company typically
  reports a net loss in its third quarter as a result of the seasonality
  of its business.

The company said that for the fiscal year ending March 3, 2007, a 53-week period:

• Net sales are currently expected to be $285 million to $295 million,
  compared with its prior estimate of $292 million to $300 million; and

• Comparable store sales are now estimated to increase 2 percent to 4
  percent, compared with the prior estimate of 3 percent to 5 percent;
  and

• The company reaffirmed its previous guidance of net income for fiscal
  2007 of $6.8 million to $7.3 million, or 60 cents to 64 cents per
  diluted share (assuming 11.4 million weighted average shares
  outstanding). Golf Galaxy's guidance on net income for fiscal 2007
  includes estimated expenses of approximately $900,000, or 8 cents per
  diluted share, from the expensing of stock options.

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

                                     Three Months Ended      Six Months Ended
                                        (Unaudited)            (Unaudited)
                                    Aug. 26,   Aug. 27,    Aug. 26,   Aug. 27,
                                      2006       2005        2006       2005

    Net sales                       $95,646    $69,635     $178,163  $128,205
    Cost of sales                    64,322     47,565      120,541    87,907
    Gross profit                     31,324     22,070       57,622    40,298
    Operating expenses:
     Retail operating                14,895     10,773       30,712    21,705
     General and administrative       4,457      2,155        8,939     5,257
     Preopening                         126         40        1,774     1,350
    Income from operations           11,846      9,102       16,197    11,986
    Interest income, net                 75        100           83       115
    Income before income taxes       11,921      9,202       16,280    12,101
    Income tax expense               (4,920)    (3,755)      (6,707)   (4,961)
    Net income                        7,001      5,447        9,573     7,140
    Less preferred stock dividends       --       (723)          --    (1,721)
    Net income applicable to common
     shareholders                    $7,001     $4,724       $9,573    $5,419
    Net income per share:
     Basic                            $0.64      $0.98        $0.87     $1.62
     Diluted                          $0.61      $0.59        $0.83     $0.83
    Weighted average number of
     shares outstanding:
      Basic                      10,999,356  4,801,458   10,945,096 3,342,714
      Diluted                    11,432,419  9,211,662   11,487,024 8,634,726