Golfsmith Offsets Comps Drop with New Stores…

Golfsmith International Holdings, Inc. used an increase in store count and in direct-to-consumer sales to offset decreased same-store sales in the fourth quarter and to create a mid-single digits top-line gain. However, this increase was not enough to offset decreased margins and increased expenses that caused the company to ultimately report a net loss for the quarter.

Overall, fourth quarter net revenues amounted to $75.0 million, up 4.5% from $71.8 million in the year-ago quarter. The increase was due to sales from 10 stores opened in fiscal 2006 and a 1.2% increase in net revenues from its direct-to-consumer channel that was “partially offset by a decrease in sales in existing stores.” Comparable store sales for the fourth quarter of 2006 decreased 5.5% after jumping 13.5% during the fourth quarter of fiscal 2005.

Gross profit for the fourth quarter decreased 60 basis points to 34.6% of net sales, while SG&A expenses increased 80 basis points to 35.0% of net sales, causing the company to report a net loss for the quarter. The decrease in gross profit was attributed to “a larger proportion of sales in lower-margin categories, such as golf clubs and electronic accessories,” while the company pointed to the opening of 10 stores in the fiscal year as the cause of the increased SG&A expenses.

Though the decreased margins and increased expenses caused the company to report a net loss for the quarter, the net loss of $1.6 million, or a loss per diluted share of 10 cents, was an improvement over last year’s quarterly loss of $2.3 million, or 23 cents per diluted share.

For the first quarter of fiscal year 2007, the company anticipates net revenues to increase between approximately 3% and 5.5% to range from $77 million to $79 million, with comparable store sales decreasing between 6% and 7%. The diluted loss per share is expected to be between 22 cents and 20 cents.

For the full year of fiscal 2007, the company expects net revenues to increase between 16.5% and 20% to a range of approximately $417 million to approximately $430 million, with comparable store sales increasing between 1.5% and 3.0%. Diluted earnings per share are expected to be between 69 cents and 79 cents compared to the loss of 54 cents reported for 2006. The company plans to open between 12 and 14 stores in 2007, the majority of which will be in the first six months of the year.