Golfsmith International Holdings, Inc. saw a strong sales result transfer down to the bottom line, where the companys net loss was more than halved during the seasonally slow first quarter. Due to the timing of sales, a net loss in the first quarter is typical in much of the golf specialty retailer segment.
The first quarter net revenues increase was mostly comprised of a $5.2 million, or 12.3% increase in comparable store revenues and an increase in non-comparable store revenues of $5.0 million. Additionally, the company experienced an increase in direct-to-consumer revenues of 1.8%, as well as an increase in international revenues of $0.2 million, or 16.6%. Growth in comparable store revenues was driven by a $4.2 million increase in golf club sales, which are higher priced products than other products the company sells. Sales of proprietary branded products accounted for 14.7% of sales in the quarter at $11 million a slight increase from $10.9 million last year, but down from a 17.1% share of net revenues for the same period last year.
The decrease in gross margin percentage was primarily due to increased sales of lower margin product during the quarter. Additionally, increased distribution costs, mainly related to promotional shipping terms, as well as increased freight costs due to rising gas prices accounted for decreases in gross profit. These declines in gross profit were partially offset by increases in vendor allowances of $700,000.
The sales increase and an SG&A expenses decrease more than compensated for the GM decline which lead to the improvement on the bottom line, though not enough to create a net gain for the quarter.
|First Quarter Results|
|(in $ millions)||2006||2005||Change|
|GP %||34.5%||35.6%||-110 bps|
|SG&A %||31.7%||33.5%||-180 bps|