Golfsmith Q3 Earnings Decline as Revenues Fall 8.5%

Operating income totaled $1.4 million for the third quarter of fiscal 2009 compared to $3.7 million for the third quarter of fiscal 2008. Third quarter 2009 operating income included a $0.4 million one-time, non-recurring charge related to litigation settlement costs.

Net income for the third quarter of fiscal 2009 totaled $1.1 million, or 7 cents per diluted share. Excluding the non-recurring litigation settlement charge, net income for the quarter would have been $1.5 million or 9 cents a share against $2.8 million, or 17 cents, a year ago, a decline of 46.4%.

As of October 3, the company had $33.7 million of outstanding borrowings under its credit facility, borrowing availability of $19.6 million, and total inventory of $79.1 million. Average store inventory declined 10.4% percent at October 3, 2009 as compared to September 27, 2008.

Martin Hanaka, chairman and chief executive officer of Golfsmith commented, “Our third quarter results reflect continued sales challenges of discretionary products in the golf industry. While store traffic has begun to stabilize, consumers remain cautious about spending. Despite this, we are pleased with the solid unit market share gains we’ve earned. We will also continue to closely manage our expenses and maintain leaner inventory levels due to uncertainty of future sales trends. We will also continue to find innovative ways to partner with our vendors to drive traffic and feel we are well positioned to emerge successfully from this challenging period.”

Year-to-Date Results

Net revenues were $274.2 million for the nine-month period ended October 3, 2009 as compared to net revenues of $310.9 million for the nine-month period ended September 27, 2008. The decrease in total revenue was due to a 9.7 percent decrease in comparable store sales and a 26.8 percent decrease in net revenues from the direct-to-consumer channel, partially offset by revenues from non-comparable stores.

Operating income totaled $4.3 million for the nine-month period ended October 3, 2009 as compared to operating income of $8.9 million for the nine-month period ended September 27, 2008. In addition to the $0.4 million one-time litigation settlement charge in the third quarter of fiscal 2009, the Company recorded a $0.5 million non-recurring charge, or $0.03 per diluted share, related to severance associated with organizational changes in this year’s first quarter. Operating results for the first nine months of fiscal 2008 included a non-recurring charge of $1.8 million, or $0.11 cents per diluted share, also related to severance.

Net income totaled $2.8 million, or 17 cents per diluted share compared to net income of $6.0 million, or 37 cents per diluted share for the nine-month period ended September 27, 2008.