Recovering from a somewhat shaky start, Golfsmith International Holdings, Inc. reported second quarter net revenues increased 4% from the same period a year ago. Gains were driven largely by sales from 12 net new stores in 2007 and a 0.5% rise in comparable sales for the quarter. Comp sales were partially offset by a 9.3% decrease in net revenues from the direct channel although catalog circulation was up significantly.
Gross margins for the second quarter, which decreased 120 basis points, were a result of using dollars saved for marketing to fund increased promotions, said Golfsmith SVP, SFO and treasurer Virginia Bunte. Product mix also impacted the margins, as sales were driven by lower margin products from used clubs and electronics while sales in the higher margin club-making category continue to decline.
“In light of the current macro environment, where value is key for customers, we made a strategic decision to reallocate marketing dollars away from less impactful traditional advertising and into the in-store promotions that consumers are seeking, which resulted in sales that outperformed the industry,” said Martin Hanaka, president and CEO of Golfsmith.
Golfsmith continues to see solid growth in the custom iron business as well as stable performance from proprietary clubs, soft lines, and technology. Tennis also remains a strong category, but driver and hybrid sales continue to decline.
Hanaka added that Golfsmith has a “pretty strong lineup” of product launches scheduled to be released in the second half of fiscal 2008, and he maintained that the lineup for the backend of 2008 is superior than that of 2007.
“We are encouraged with the sales trends in the second quarter, especially considering that rounds played were down roughly 1.5% during the quarter and 2.1% year-to-date according to Golf Data Tech. We are now running a similar comp thus far in Q3 as we did in Q2,” Hanaka said.
