Golfsmith International Holdings, Inc. spent $1.3 million exploring a strategic transaction and possible sale in the fourth quarter, the company disclosed Friday. The disclosure came as the golf retailer reported its net revenues grew 2.3 percent to 74.5 million in the quarter thanks to the addition of four stores.
This increase was partially offset by a decrease in comparable store sales of 4.7 percent and a 3.5 percent decrease in net revenues from the direct-to-consumer channel, primarily due to a decline in traffic in October and a sales disruption related to the company-wide deployment of a new ERP system, particularly on e-commerce site.
Operating loss for the fourth quarter was $5.3 million as compared to an operating loss of $5.2 million for the same period last year. The fourth quarter of fiscal 2011 included $600,000 in charges for legal and other professional services incurred outside the ordinary course of business, which we expect to continue to incur in the near future. Operating results for the fourth quarter of 2010 included $1.1 million in charges related to store closings, asset impairment and lease termination costs.
Net loss hovers at 34 cents per share
Net loss for the fourth quarter of fiscal 2011 totaled $5.6 million, or 34 cents per diluted share, as compared to a net loss of $5.7 million, or 35 cents per share for the same period last year. Excluding the store closing costs and other unusual charges in the fourth quarter of both periods, the company's net loss for the fourth quarter of fiscal 2011 was $5.0 million, or 31 cents per share, as compared to $4.6 million, or 28 cents per share, for the fourth quarter of fiscal 2010.
The company ended the fourth quarter with $41.9 million of outstanding borrowings under its credit facility and borrowing availability of $28.7 million, after giving effect to all reserves. This compares to $40.4 million of outstanding borrowings under its credit facility and borrowing availability of $18.5 million at Jan. 2, 2011.
As of Dec. 31, 2011, total inventory was $90.7 million compared to $79.4 million as of the fourth quarter of fiscal 2010. Comparable average store inventory increased approximately 5.4 percent.
The increase in inventory was primarily related to delivery of new merchandise associated with product launches planned for the first quarter and staging of inventory for new store openings in 2012.
“While we had a challenging start to our fourth quarter we were pleased to see sales trends improve in November and December,” said Chairman and CEO Martin Hanaka. “We also achieved a 450 basis-point increase in gross margin to 36.8 percent in the fourth quarter which was primarily driven by a favorable sales mix shift to higher margin categories. We have successfully executed on a number of key strategic initiatives over that last three years that we expect will enable us to achieve strong long term sales and earnings growth. I want to thank team for their hard work and dedication which has helped to solidify Golfsmith as an industry leader in the golf specialty retail space.”
Fiscal Year 2011 results
Net revenues were $387.3 million for the year ending 2011 as compared to net revenues of $351.9 million for the same period last year. Net revenues reflect a 4.7 percent increase in comparable store sales and a 9.2 percent increase in net revenues from its direct-to-consumer channel.
Operating income was $2.8 million for fiscal year 2011 as compared to an operating loss of $4.3 million for the same period last year. Results for 2011 included $1.3 million in charges for legal and other professional services incurred outside the ordinary course of business and $200,000 in lease termination charges. Operating income for fiscal year 2010 included the $2.7 million in store closing costs.
Net income for fiscal year 2011 totaled $0.9 million, or 5 cents per diluted share, compared to net loss of $5.5 million, or 34 cents per diluted share, for fiscal year 2010. Excluding the above-mentioned charges for both periods, net income would have been $2.1 million, or 13 cents per diluted share, for fiscal 2011 as compared to a net loss of $2.8 million, or 17 cents per diluted share, for the same period last year.
Due diligence on potential deal costs $1.3 million
The company incurred $1.3 million in costs in 2011 associated with exploring a strategic transaction that may include a potential sale of the company. The company is providing this disclosure in light of the magnitude of these expenses incurred outside of the ordinary course of business. The company to date has not reached an agreement with respect to such a transaction and the company cannot predict whether an agreement will be reached.