Canadian golf specialty retailer Golf Town reported strong mid-teens sales growth for the third quarter. Both margins and expenses increased at nearly the same rate, and without any other extraneous one-time charges or benefits, much of the sales growth transferred straight to the net income line. The retailer opened four stores during the past twelve months, bringing it to a total of 28 stores in operation at the end of the quarter. Total sales at Golf Town for the third quarter increased 15.2% to CN$70.2 million ($62.6 mm) from CN$60.9 million ($50.6 mm) in the year-ago period.
Gross margin increased 80 basis points to 33.8% of sales. Management attributed the margin improvement to continued higher gross margin rates on club sales as a result of special buys and volume purchasing. However, the margin gains were largely offset by a 70 basis point increase in SG&A expenses to 19.8% of sales.
The sales increase effectively passed cleanly through to the bottom line where net income increased 14.5% in the quarter to CN$6.3 million ($5.6 mm) from CN$5.5 million ($4.6 mm) in 2005. Diluted earnings per share increased 13.6% to CN50 cents (45 cents) from CN44 cents (37 cents) in the year-ago quarter.
Though the company did not give specific guidance for future quarters, Stephen Bebis, president and CEO said, “Looking ahead to 2007, we expect to continue opening new stores at the current pace, primarily in smaller markets, as well as fill-in stores in markets where we have already established a solid presence.”
