Golfsmith International Holdings, Inc. saw second quarter net revenues increase 9.6% to $125.0 million from $114.1 million for the second quarter of fiscal 2006. Sales through the company’s stores increased 14.1% to $96.8 million from $84.9 in the year-ago quarter. Direct sales decreased 4.8% to $25.7 million, despite an online ad campaign the company launched with ESPN making it the official golf and tennis pro shop of midway through Q1. International sales increased 10.0% to $2.5 million from $2.3 million last year.

Comparable store revenues declined by 4.7% for the quarter, continuing to be negatively impacted by increased competition in select geographic markets, specifically Dallas and Atlanta where the PGA Tour Superstores have a presence, as well as declines in the retail club component business, as more players are opting for customized branded equipment rather than buying and building their own.

The company reported income from operations of $7.7 million in the second quarter compared with $6.5 million for the second quarter of fiscal 2006. Gross margins and operating income continued to be pressured by a higher sales mix of lower margin products and a decline in sales in the higher margin club-making business. The company's operating results were also largely affected by increased selling, general and administrative expenses associated with 15 new stores opened since July 1, eight of which opened during the second quarter of 2007.

GOLF also reported net income of $6.8 million in the second quarter, or earnings per diluted share of 43 cents, versus last year’s net loss of $7.9 million, or a loss per diluted share of 73 cents. The company was able to make such a dramatic shift to its bottom line after incurring charges related to its IPO that dragged pro forma net income of $7.2 million or 64 cents per diluted share down to the net loss experienced last year.

For the full year, the company expects comparable store sales of negative 3.0% to negative 2.0% and diluted earnings per share for the year to be between 30 cents and 35 cents. At the end of the first quarter, the company expected annual comps to be between flat and negative 3.0%, with earnings per share between 30 cents and 45 cents. In addition, the company now expects to open 13 stores in fiscal 2007. Three stores were opened in the first quarter, eight stores were opened in the second quarter and one store has been opened to-date in the third quarter. The company plans to open one store in the fourth quarter of fiscal 2007.