The recent economic upswing and better weather didn’t come in time to rescue Golfsmith’s first quarter top-line results as the company posted a decrease in sales, primarily due to consumer direct sales. Given the circumstances facing the golf market this winter, the hit really wasn’t as bad as it could have been.
Total sales slipped 1.7% to $67.6 million for the fiscal first quarter ended March 31. GOLF saw a 13.5% decline in their consumer direct channel to $10.6 million, while retail sales inched 0.8% to $55.3 million.
At retail, sales of clubs were said to be “about company average,” consumables were down 6% and soft lines were up strong double digits. The mix now has moved from about 15% of total sales to almost 18% of the total in-store sales. Tennis was down about 10% for the period.
International sales were up 2.5% to $1.7 million.
The company attributes the overall decline to unusually treacherous winter weather patterns that primarily rocked the East Coast, as well as a nation-wide drop in golf rounds played. Accordingly, January rounds were down roughly 19%, February was down 22% and March was off 4%. Year-to-date, rounds played are down an approximately 12.4%.
Accordingly, GOLF’s sales in January and February were down low-single digits and sales came back in March with a slight increase. April was said to “slightly better” than the Q1 results.
Management said the growth in softlines is having a positive effect on margins. The proprietary business has moved from 8.6% of total sales to 9.3% – and that is before the MacGregor effect, which just launched on March 31.
The retailer’s gross margin increased 60 basis points to 33.7% for the first quarter as compared to 33.1% Q1 2009. The jump consisted of a 70 basis point increase associated with less promotion in the 2010 quarter, as well as a 30 basis point increase due to improved physical inventory result as compared to the prior-year first quarter. These increases were partially offset by a 40 basis point decrease in vendor allowances associated with a reduction of cost of sales this year as compared to last year. SG&A increased to 41.2% of sales in the current quarter compared to 40.7% of sales in the prior-year quarter.
Currently, Golfsmith remains optimistic, but cautious in their approach to the current year. Golfsmith’s marketing expenses are expected to remain flat, if only up slightly. Although Golfsmith is entering its self proclaimed “Holiday” summer season, the golf retailer is striving to “continue to differentiate without discounting,” said GOLF Chairman and CEO Marty Hanaka.
Hanaka noted that NGF says rounds played will be essentially flat in Q2 and said there'll be some seasonal correction depending where you're living. Still, they are not looking for growth in rounds played.
