Golfsmith International Holdings, Inc. saw first quarter net revenues total $77.7 million, up 3.9% from $74.8 million for the first quarter of fiscal 2006. The increase was largely due to net revenues from 13 non-comparable retail stores that were opened subsequent to April 1, 2006, offset by a 9.3% decrease in net revenues from its direct channel and a 5.7% decrease in comparable store sales.

According to the company, comparable store sales for the quarter continued to be impacted by increased competition in certain major geographic markets and declining sales in the clubmaking business.

The company reported an operating loss of $3.9 million compared with an operating income of $1.9 million for the same period of fiscal 2006. Gross margins and operating income were pressured by a higher sales mix of lower margin products, such as golf clubs and electronic accessories, and a lower sales penetration of higher margin items such as clubmaking products. The company's operating results were also affected by increased selling, general and administrative expenses associated with 13 store openings since the first quarter of 2006, increased advertising expenses to support a larger store base and national promotions, and increased costs associated with being a public-equity company.

The company also reported a net loss of $4.9 million, or a loss per diluted share of 31 cents based on 15.7 million fully diluted weighted average shares outstanding. This compares with a net loss of $0.9 million, or a loss per diluted share of 9 cents based on 9.8 million fully diluted weighted average shares outstanding, in the three months ended April 1, 2006.

“The first quarter was a challenging and disappointing quarter,” said Jim Thompson, chief executive officer and president of Golfsmith. “Revenue and gross profit growth in our comparable retail stores and direct channel business were impacted by several factors, including increased competition, heightened promotional activities in certain major markets, continued decline of the clubmaking business and slower-than-expected sales of new drivers. Additionally, golf rounds played in the United States as reported by the National Golf Foundation were down four percent versus the first quarter of 2006,” said Thompson. “While some of these factors will likely impact results, we remain focused on our multi-channel business model, brand strength and Guest First program which distinguishes us from our competition,” Thompson said.


Outlook

Based on the results of first quarter and the continued softness in demand early in the second quarter, the company is updating its outlook.

For the second quarter of fiscal year 2007, the company anticipates net revenues to range from $123 to $126 million, and comparable store sales of between negative 4.5% and negative 6.5%. The diluted earnings per share is expected to be between 36 cents and 41 cents based on fully diluted weighted average shares outstanding of 15.8 million.

For the full year of fiscal 2007, the company has modified its original guidance and now expects net revenues to range from $389 million to $400 million and comparable store sales of flat to negative 3%. The diluted earnings per share are expected to be between 30 cents and 45 cents based on fully-diluted weighted average shares outstanding of 15.8 million. The company still expects the total new store openings in 2007 to be 12 to 14 stores. Three stores were opened in first quarter and another four have already opened in the second quarter. In addition, the company plans to open four more stores in the second quarter.

              Golfsmith International Holdings, Inc.
                Consolidated Statements of Operations

                                              Three Months Ended
                                         March 31, 2007  April 1, 2006
                                           (Unaudited)    (Unaudited)
                                         --------------- -------------

Net revenues                                $77,662,496   $74,810,296
Cost of products sold                        51,579,270    49,007,939
                                         --------------- -------------
Gross profit                                 26,083,226    25,802,357

Selling, general and administrative          29,351,900    23,702,479
Store pre-opening expenses                      630,766       199,749
                                         --------------- -------------
Total operating expenses                     29,982,666    23,902,228

                                         --------------- -------------
Operating income (loss)                      (3,899,440)    1,900,129

Interest expense                               (983,490)   (3,059,426)
Interest income                                   5,902        10,783
Other income                                     31,998       322,064
Other expense                                   (42,979)      (42,944)
                                         --------------- -------------
Income (loss) before income taxes            (4,888,009)     (869,394)

Income tax expense                              (20,982)            -
                                         --------------- -------------

Net income (loss)                           $(4,908,991)    $(869,394)
                                         =============== =============

Net income (loss) per share:
   Basic                                         $(0.31)       $(0.09)
   Diluted                                       $(0.31)       $(0.09)
Weighted average number of shares
 outstanding:
   Basic                                     15,730,759     9,803,712
   Diluted                                   15,730,759     9,803,712