Sport Chalet, Inc. reported sales totaled $88.8 million for the second quarter ended Sept. 26 as Team and E-Commerce sales offset a 1.9% decrease in comparable store sales. The company said promotional activities aimed at growing store sales have fallen flat throughout the first half of the fiscal year.

Gross profit as a percent of sales increased slightly to 28.2% from 28.0% for the second quarter of last year, primarily due to lower rent expense from successful negotiations with landlords, partially offset by an increase in markdowns from promotional activity.
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Selling, general and administrative expenses (SG&A) as a percent of sales increased to 25.2% from 24.8% in the same period last year, primarily reflecting an increase in labor for store payroll and training to support the company's initiative on having the best trained experts in merchandise and specialty services. Depreciation declined as a percent of sales to 2.9% from 3.7%, primarily due to impairment charges incurred in the previous two fiscal years, as well as lower capital expenditures with no new store openings or remodels.
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The company's net loss for the quarter was reduced by $694,000 to $518,000, or 4 cents per share, from a net loss of $1.2 million, or 9 cents per share, for the quarter ended September 27, 2009.
“Results for the second quarter demonstrated the benefits of the initiatives implemented throughout the company over recent periods and enabled us to reduce our net loss and achieve positive operating income,” said Craig Levra, chairman and CEO. “We continue to strengthen the company's liquidity by managing expenses and focusing on our inventory position, which, in turn, will further improve operating efficiencies. Our recently signed, new credit facility with Bank of America represented a vote of confidence in the company's future by one of the nation's leading financial institutions and provides us with tremendous flexibility to support our strategic initiatives and to further enhance our vendor relationships.”

Six-Month Results
For the six months ended Sept. 26, sales rose to $168.5 million from $168.2 million for the first half of the prior fiscal year. The slight increase is attributable primarily to improvements in the Team Sales and E-Commerce divisions, partially offset by a 1.5% decrease in comparable store sales.
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Continued macroeconomic weakness in the company's markets provided no catalysts for a sales increase despite the company's promotional events and initiatives to improve sales.

Gross profit as a percent of sales increased to 28.2% from 27.2% for the first six months of last year. SG&A as a percent of sales increased to 25.8% from 25.0% a year ago. Depreciation as a percent of sales declined to 3.1% from 4.0%.
The company's net loss for the six months ended Sept. 26 was reduced by $1.7 million to $2.5 million, or $0.17 per share, from a net loss of $4.2 million, or $0.30 per share, for the six months ended September 27, 2009.

Liquidity
As a result of the company's focus on improving inventory productivity, inventory decreased $3.6 million in the 26 weeks ended Sept. 26 from the higher than planned inventory levels at the end of fiscal 2010. As previously reported, Sport Chalet signed a new four-year $65 million credit agreement with Bank of America in October 2010, replacing its previous credit facility. The new credit facility allows the company to borrow on more favorable terms and conditions with an increase in availability, a reduction in interest rates, revised financial covenants and an extended expiration date to October 2014.

Sport Chalet has 55 stores in California, Nevada, Arizona and Utah; Sport Chalet online at sportchalet.com; and a Team Sales division.

Sport Chalet, Inc.

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Consolidated Statements of Operations







13 weeks ended 26 weeks ended

September 26, 2010 September 27, 2009 September 26, 2010 September 27, 2009

(in thousands, except per share amounts)
Net sales $ 88,763 $ 88,811 $ 168,450 $ 168,214
Cost of goods sold, buying and
occupancy costs
63,755 63,980 120,902 122,393
Gross profit 25,008 24,831 47,548 45,821





Selling, general and administrative expenses 22,328 22,066 43,480 42,003
Depreciation and amortization 2,549 3,274 5,188 6,730
Income (loss) from operations 131 (509) (1,120) (2,912)





Interest expense 649 703 1,341 1,284
Net loss $ (518) $ (1,212) $ (2,461) $ (4,196)





Loss per share:



Basic and diluted $ (0.04) $ (0.09) $ (0.17) $ (0.30)