Sport Chalet, Inc. expects to report second quarter net sales in the range of $97 million to $98 million up from $91.3 million in the same period of the prior year. Comparable store sales for the second quarter are expected to decline in the range of 2% to 3%. Sport Chalet anticipates second quarter earnings per diluted share will range between breakeven and 2 cents compared to earnings per diluted share of 12 cents in the prior year's second quarter.
During the second quarter the company said it continued to experience a challenging sales environment, which will impact its sales and earnings results. In particular, Sport Chalet has seen continuing soft comparable store sales trends in its mature markets, partially due to cannibalization resulting from the company's backfilling core markets to increase overall market share. Additionally, the company has experienced a further negative impact to its results due to weak macroeconomic trends in the company's markets.
Given the recent challenging selling environment, Sport Chalet is taking a cautious approach in its outlook for the remainder of the fiscal year. Assuming current macroeconomic and company trends continue in the second half of the year, management expects full fiscal year net sales will increase moderately over fiscal 2007 while comparable store sales are expected to be flat to slightly below the prior fiscal year. Net income is expected to be slightly lower than last year as sales growth from new stores is offset by their costs, due to new stores taking time to reach operating efficiency. The company also noted that its third and fourth fiscal quarters include the holiday selling season plus the winter business and can therefore be difficult to predict.
“We are disappointed in our performance in the second quarter,” Craig Levra, Chairman and CEO of Sport Chalet, stated. “We have experienced uneven sales across our store base during the quarter. As we entered the year, we planned for a certain level of sales pressure on select mature stores as a result of our backfilling strategy as well as from competition entering our markets. However, this sales pressure has been prolonged and exacerbated by softer than expected consumer trends, particularly in Southern California.
“While we are operating in a challenging environment, we remain focused on things that are within our control and are confident that this will allow Sport Chalet to navigate through the current market conditions. We strongly believe in our overall growth strategy as the performance of our new stores remains solid and we are continuing to receive good customer response to our merchandise and services. We are continuing to find and bring in new specialty brands and merchandise that is geared toward sports enthusiasts and will create excitement in our stores. We have also implemented a program to better analyze and improve our marketing and advertising efforts and will be executing new results-based initiatives as we go forward. Additionally, we remain committed to rolling out our Action Pass frequent shopper program to all of our stores this fall to continue to attract and build strong relationships with those customers who shop more frequently in our stores. Our entire team is dedicated to successfully carrying out our strategic initiatives and driving the long-term growth of Sport Chalet.”
