Sport Chalet Comps Up 5.5 Percent in Strong Third Quarter

Sport Chalet Inc. reported sales increased $3.5 million, or 3.9 percent, to $91.5 million for the third quarter ended Sept. 30, from $88.0 million for the 13 weeks ended Oct. 2, 2011.

Gross profit decreased $0.5 million, or 1.9 percent, and as a percent of sales decreased to 27.6 percent from 29.2 percent. The 1.6 percent decrease as a percent of sales is primarily due to 0.8 percent from a promotional campaign in August, 0.3 percent in costs related to ongoing customer satisfaction initiatives implemented in August 2011, and changes in merchandise costs and in the product mix.

Selling, general and administrative (“SG&A”) expenses decreased $0.4 million, or 1.9 percent, primarily due to $0.4 million in savings from labor-related expenses, such as self-insurance for employee health insurance coverage and stock option expense. As a percent of sales, SG&A decreased to 24.0 percent from 25.4 percent. Depreciation decreased $0.3 million as a result of the low level of capital expenditures in recent fiscal years with no new store openings or significant remodels.
 
Net income for the quarter ended Sept. 30, 2012 increased $0.2 million to $0.8 million, or $0.05 per diluted share, compared to net income of $0.6 million, or $0.04 per diluted share, for the quarter ended Oct. 2, 2011.

“We are pleased with our second quarter results as we continued to grow top line sales and increased profitability with sequential and year-over-year improvements in both,” said Craig Levra, chairman and CEO. “The momentum we experienced during the first quarter continued in the second quarter, and we believe that we are well positioned to have a profitable fiscal 2013. Our recent results reflect the steps we have taken over the past few years to strengthen our financial position and adjust our operations. We are optimistic as we head into our most important holiday season with more technical merchandise available compared to last year from the most innovative brands from across the globe and our focus on expanding our Experts' knowledge in our technical offerings has never been greater.”
 
Six-Month Results
 
For the six months ended Sept. 30, 2012, total sales increased 2.6 percent to $175.3 million from $170.8 million for the first half of the prior fiscal year. The sales increase is primarily due to a comparable store sales increase of 4.1 percent, an improvement on top of the 2.7 percent increase in the same period last year, Team Sales division and Online sales increased 18.8 percent and 11.1 percent, respectively, partially offset by one store closure which contributed $3.2 million in sales in the prior year.

Gross profit as a percent of sales decreased to 27.7 percent from 29.0 percent for the first six months of last year. The 1.3 percent decrease as a percent of sales is primarily due to 0.5 percent from a promotional campaign in August, 0.3 percent in costs related to ongoing customer satisfaction initiatives implemented in August 2011, and changes in merchandise costs and in the product mix.
 
SG&A expenses decreased $1.3 million, or 2.9 percent, primarily due to $1.4 million in savings from labor-related expenses, such as self-insurance for employee health insurance coverage, incentive payments largely for store employees and stock option expense. SG&A expenses as a percent of sales decreased to 24.3 percent from 25.7 percent. Depreciation decreased $0.8 million as a result of the low level of capital expenditures in recent fiscal years with no new store openings or significant remodels.
 
The Company's net income for the six months ended Sept. 30, 2012 improved by $1.1 million to $0.9 million, or $0.06 per diluted share, from a net loss of $0.2 million, or $0.02 per diluted share, for the same period last year.

New store opening
 
As previously announced, the Company currently plans to open a store in May 2013 in Downtown Los Angeles. Sport Chalet will be an anchor tenant at Brookfield Office Properties' FIGat7th, the destination retail center at the intersection of Figueroa Street and 7th Street that has undergone a $40 million redevelopment. The store will occupy 27,300 square feet of space at the lower courtyard level, and will join City Target as the first new anchors at the redeveloped FIGat7th. This store will incorporate a new design template of enhanced displays, fixtures, and graphics to reinforce the Sport Chalet brand and its market positioning as a destination for premium brands, technical merchandise and the highest quality service offerings.