Golfsmith International Holdings, Inc. saw fourth quarter net revenues increase 5.3% to $79.0 million from $75.0 million for the fourth quarter of fiscal 2006. The increase includes net revenues from 13 non-comparable retail stores opened after December 30, 2006, partially offset by a 6.7% decrease in net revenues from its direct channel and a 4.6% decrease in comparable store sales.


Operating loss totaled $45.6 million in the fourth quarter after giving effect to $43.0 million of non-cash impairment charges to goodwill, related to the decline of the company’s stock price and market capitalization, and long-lived assets at certain stores. This compares to a $0.6 million loss for the fourth quarter of fiscal 2006. Excluding the impairment charges, the non-GAAP operating loss in fourth quarter was $2.6 million.


Net loss totaled $46.7 million or a loss per share of $2.95, based on 15.8 million fully diluted weighted average shares outstanding. Excluding the $43.0 million of impairment charges, the company’s non-GAAP net loss was $3.7 million or 23 cents per share. This compares with a net loss of $1.6 million, or 10 cents per share, based on 15.7 million fully diluted weighted average shares outstanding in the three months ended December 30, 2006.


“While our results were reflective of overall softness in the golf industry in the fourth quarter and particularly in December, we were not satisfied with our execution or overall performance during this period,” said Martin Hanaka, chairman and interim chief executive officer of Golfsmith. “We remain committed to our multi-channel business strategy and plan to focus on bottom line results in fiscal 2008 by streamlining our expense structure, driving gross margins, enhancing our marketing strategy and improving inventory management.”

Fiscal 2007 Highlights


Net revenues increased 8.5% to $388.2 million compared with net revenues of $357.9 million for the full-year ended December 30, 2006. This increase was attributable to net revenues from 13 non-comparable retail stores opened after December 30, 2006, but was partially offset by a 6.2% decrease in net revenues from the direct channel and a 3.7% decrease in comparable store sales.


The company reported an operating loss of $36.9 million for the full-year ended December 29, 2007 including $43.0 million of non-cash impairment charges to goodwill and long-lived assets. Excluding the impairment charges, non-GAAP operating income was $6.1 million. This compares to non-GAAP operating income of $11.6 million for the fiscal year 2006.


The company reported a net loss for fiscal 2007 of $40.8 million, or a loss per share of $2.58, based on 15.8 million fully diluted weighted average shares outstanding. This compares with a net loss of $8.1 million, or 62 cents per share, based on 13.0 million fully diluted weighted average shares outstanding in fiscal 2006. Excluding the impairment charges, non-GAAP net income was $2.2 million or 14 cents per diluted share in fiscal 2007. This compares with non-GAAP net income of $8.1 million in fiscal 2006. The company’s net loss in fiscal 2006 included charges of $12.8 million related to the early extinguishment of debt and $3.4 million related to the termination of our management agreement with First Atlantic Capital and other one-time IPO related costs.


As of December 29, 2007, total inventory was $98.5 million as compared to $88.2 million on December 30, 2006 and average inventory per store was flat.

Outlook


For fiscal 2008 Golfsmith expects overall sales growth to be slightly positive with slightly negative comparable store sales and a decrease in direct sales. Earnings growth will be driven by gross margin expansion and cost containment as well as reduced store openings.


 


























































































































































































































































































































































































































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Golfsmith International Holdings, Inc.
Consolidated Statements of Operations
 
    Fiscal Year   Three Months Ended
December 29, 2007   December 30, 2006 December 29, 2007   December 30, 2006
    (Unaudited) (Unaudited)
 
Net revenues $ 388,157,258 $ 357,890,195 $ 78,969,155 $ 74,961,509
Cost of products sold   252,254,943     232,073,044     51,413,713     49,019,416  
Gross profit 135,902,315 125,817,151 27,555,442 25,942,093
 
Selling, general and administrative 127,420,598 112,456,208 29,850,870 26,206,960
Store pre-opening expenses 2,361,324 1,799,836 311,758 379,953
Impairment of goodwill 41,634,525 41,634,525
Impairment of fixed assets   1,359,140         1,359,140      
Total operating expenses 172,775,587 114,256,044 73,156,293 26,586,913
                       
Operating income (loss) (36,873,272 ) 11,561,107 (45,600,851 ) (644,820 )
 
Interest expense (3,784,517 ) (7,669,944 ) (1,067,951 ) (1,020,215 )
Interest income 103,477 434,042 33,811 1,023
Other income 742,129 691,688 444,506 264,680
Other expense (346,834 ) (164,236 ) (199,686 ) (19,147 )
Loss on debt extinguishment       (12,775,270 )        
Loss before income taxes (40,159,017 ) (7,922,613 ) (46,390,171 ) (1,418,479 )
 
Income tax expense   (661,033 )   (186,725 )   (305,245 )   (155,609 )