The former Gart Sports filed its 10-Q for its 2003 fiscal second quarter, covering the financial results of the previous Gart Sports side of the business only.

Preliminary results were reported in SEW 0325.
The company revealed in the filing with the SEC that Financo, Inc., a financial advisory firm, had filed a complaint against Gart Sports Company in the Delaware Court of Chancery in June 2003 alleging that Gart owed Financo $2,000,000 for services provided to Gart Sports in connection with the merger negotiations with pre-merger TSA. Financo said they first proposed the merger in July 2002 and entered into discussions with TSA’s advisor, CSFB with Gart’s full knowledge and approval.

The new TSA/former Gart wrote in the filing that there was “no written contract” between Gart and Financo, the “claim is without merit” and that the company intends to “vigorously defend the lawsuit”. TSA said they do not believe that the outcome of action will have a material adverse effect on TSA’s “financial condition, results of operations, or liquidity”.

On the financial side, Gart said its 0.6% comp store decline for Q2 was primarily the result of a roughly $5.9 million decrease in athletic footwear and skate sales.

The decline was offset a bit by a $4.1 million increase in sales of hunting and camping merchandise. The filing indicated that the 400 basis point gross margin improvement was primarily due to improved merchandise margins in the apparel and outdoor categories.

Merger integration costs associated with the merger with TSA for the fiscal first half were $1.7 million, or 0.6% of net sales. These costs consist primarily of $1.0 million of consulting fees and $0.7 million of costs associated with travel and severance.

First half comps were off 4.5%, impacted primarily by a less promotional pricing in footwear that produced a $6.0 million sales decline in the quarter and the inability to anniversary $2.7 million in Winter Olympic sales. First half sales of In-Line Skates decreased by $2.4 million, due primarily to fewer promotional events and an “overall downward trend in the popularity of the category”.

Capital expenditures are projected to be approximately $50 to $60 million in fiscal 2003.

Footlocker, Inc. broke sales down a bit further for its second quarter in its 10-Q filing with the SEC. In the preliminary results reported in SEW 0334, Foot Locker saw comparable store sales decline 4.4%.

Total sales rose 3.4%, but declined 0.9% on a currency-neutral basis.

In the recent filing, FL broke out Athletic Stores, indicating that sales from the non-Consumer Direct business increased 3.3% for the quarter, but fell 1.3% on a currency-neutral basis. Comparable store sales for the Athletic Store business slipped 5.0% for the quarter.
Foot Locker also indicated that the 700 basis point gross margin improvement for the quarter was driven primarily by better merchandise purchasing, including increased vendor allowances.

The retailer reported that continuing current trend of classic shoes led footwear sales across most of the Athletic Store formats during the first half of 2003, while sales for the previous year period were driven by basketball footwear. Apparel sales, including both licensed and private label categories were “particularly strong” during both the thirteen and twenty-six weeks ended August 2, 2003.

Management said it expects the current trend of classic footwear and licensed apparel to continue to be strong performers throughout the balance of 2003 and into 2004 and had accelerated the receipt of inventory during Q2 to accommodate the trend as well as to support the growth of Foot Locker Europe and to meet the back-to-school demand.

FL also reported that despite changes initiated to Lady Foot Locker's management team in Q3 2002 and the “continuing the process of developing various merchandising initiatives” for the format to improve its performance, “operating results during the first half of 2003 were less than anticipated”.

Management said it will “monitor the progress of the format and will assess, if necessary, the impact of these initiatives on the projected performance of the division, which may include an analysis of the recoverability of store long-lived assets pursuant to SFAS No. 144”.