Traffic levels finally evened out at Golfsmith International for the third quarter of 2009, but an increasingly wary consumer and a highly-promotional environment resulted in a lower average ticket, which in turn sunk earnings. Net sales for the golf retailer slipped 10.9% to $90.6 million on an 8.5% comps decline. Earnings plummeted 61.3% to $1.1 million, or 7 cents per diluted share, in a quarter that put Golfsmith in a hole starting with a weak Father’s Day and never saw a rebound. Direct-to-consumer sales fell 27%.
“If we look at the third quarter, were stayed on defense with disappointing top-line results,” said Marty Hanaka, chairman and CEO of Golfsmith. “We thought we’d see more improvement than we did.”
The focus, added Hanaka, is improving the average order value to be in line with traffic counts. “ people have moved to value,” he admitted, “that trend has not changed all year and [it’s] really a continuing risk to recoveries, to get that big category irons to really see improvement.”
Gross margins decreased 110 basis points to 42.2% of sales from 34.3% in the year-ago period, partially reflecting an increased promotional environment. A 60-basis-point improvement related to lower freight costs and distribution center efficiency, and was offset by a 70-basis-point negative impact resulting from the change in the classification in vendor funding earned from a cooperative vendor program that was implemented in the fourth quarter of last year.