Golfsmith International Holdings, Inc. reported slight sales growth for the fiscal second quarter ended July 3, but noted that improvement was driven by the addition of four new storefronts – not a rebounding selling environment.


“Q2 is a shortfall of our expectation since the recovery is going to be a little longer and somewhat slower than we thought.,” said Marty Hanaka, company chairman and CEO, in a conference call with analysts.  Revenues for the golf specialty retailer improved 2.8% for the quarter, but same-store sales slipped 0.4% despite a year-ago period that represented weakness in almost every category.


Revenues from the retailer’s Consumer Direct channel slipped 0.3% for the quarter. Hanaka maintained that despite disappointing results, there was a silver lining.


Specifically, Hanaka pointed to a strong overall club business, which overcame tough year-ago comparisons when sales were stimulated by giveaway sales. Likewise, Hanaka said irons and wedges produced a strong quarter and most regions – with the exception of California – came in stable for the period. Hanaka added that management was especially encouraged by the Direct segment, which reversed its negative trending during the quarter.


Net earnings were $6.2 million, or 36 cents per diluted share, a decline of 8.6% from earnings of $6.8 million, or 42 cents per diluted share, in the year-ago period. Gross margin for the quarter improved 10 basis points to 35.0% of sales, due largely to a 40 basis point increase generated from lower markdowns and a sales mix shift towards proprietary brands and apparel.


While Hanaka declined to give specific outlook, he noted that “current sales trends are solid,” adding that the five weeks preceding the conference call have been “very encouraging.” “It’s not double digits,” he added, “…but it is very solid and we are please with it.”