Sport Chalet fiscal year ended March 31, 2005 sales increased 17.0%, from $264.2 million last year to $309.1 million this year. The increase is the result of opening five new stores this year and three last year, as well as a same store sales increase of 5.7%. The same store sales increase is due to better inventory assortments compared to the same period last year and increased customer traffic from the appeal of winter related merchandise.
Sales of winter related merchandise were driven by record winter weather conditions at the resorts frequented by our customers. Same store sales excluding winter related products increased 4.7%. Gross profit margin increased from 30.3% last year to 30.9% this year primarily due to a strong winter season, which reduced the need for markdowns as well as reduced costs from more efficient inbound logistics. Selling, general and administrative expenses (“SG&A”), as a percentage of sales, increased slightly from 27.4% last year to 27.5% this year primarily from approximately $1.5 million in: (i) increased litigation reserves and (ii) professional fees primarily associated with the recapitalization plan announced today in a separate release. This increase was partially offset by a decrease in workers' compensation expense due to a significant reduction in claim activity resulting from the implementation of a new safety program. Net income increased $1.5 million, or 32.9%, from $4.6 million, or $0.66 per diluted share last year, to $6.2 million, or $0.88 per diluted share this year.
For the fourth quarter ended March 31, 2005, sales increased 14.1%, from $69.4 million last year to $79.2 million this year. The increase is the result of opening five new stores in fiscal 2005, as well as a same store sales increase of 4.4%. Comparable store sales excluding winter related products increased 4.1%. Gross profit margin increased from 29.5% to 30.8% due to increased sales of higher margin apparel combined with a reduction in end-of-season markdowns as record winter weather conditions increased customer demand for winter related products. SG&A, as a percentage of sales, increased from 28.8% to 29.3% primarily from approximately $1.2 million in: (i) increased litigation reserves and (ii) professional fees primarily associated with the recapitalization plan. This increase was partially offset by a decrease in workers' compensation expense due to a significant reduction in claim activity resulting from the implementation of a new safety program. Net income increased $392,000, or 118.8%, from $330,000, or $0.05 per diluted share, for the quarter ended March 31, 2004, to $722,000, or $0.10 per diluted share, for the same quarter this year.
Commenting on the results, Craig Levra, Chairman and CEO said, “Our outstanding results for the quarter and the fiscal year reflect the consistent and effective execution of our strategic plan. The entire Sport Chalet team contributed to a very successful year during which we made strides in both enhancing our operational performance and implementing our growth plans. As we expand into Arizona in the new fiscal year, we believe we are well positioned for continued strong performance.
“As we announced in a separate release today, the Company's board of directors has proposed a recapitalization plan that is designed to facilitate the orderly transition of control from Norbert Olberz, the principal stockholder, to the Company's management and increase financial flexibility for the Company and its stockholders. The proposed recapitalization plan retains current stockholders' existing voting interests and allows management to maintain our strong culture and continue to focus on our growth strategy. Overall, we are pleased with our results for fiscal 2005 and encouraged about the direction of our business. We remain committed to our strategy to generate long-term top and bottom line growth and increase stockholder value.”
The Company's Form 10-K with full financial statements will be available before June 30, 2005.
Sport Chalet also announced in a separate release that its board of directors has proposed a recapitalization plan designed to facilitate the orderly transition of control from Norbert Olberz, the principal stockholder, to the Company's management and increase financial flexibility for the Company and its stockholders. The recapitalization plan includes transferring a portion of founder Norbert Olberz's Sport Chalet ownership to Craig Levra, Chairman and Chief Executive Officer, and Howard Kaminsky, Chief Financial Officer, and allows current stockholders to retain existing ownership and voting interests.
SPORT CHALET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three months ended Year ended
March 31, March 31,
2005 2004 2005 2004
Net sales $79,172,304 $69,404,267 $309,089,551 $264,236,923
Cost of goods sold,
occupancy 54,822,746 48,898,721 213,428,269 184,046,770
Gross profit 24,349,558 20,505,546 95,661,282 80,190,153
expenses 23,161,970 19,970,500 85,144,702 72,360,528
operations 1,187,588 535,046 10,516,580 7,829,625
Interest expense 26,774 27,854 263,523 189,924
Income before taxes 1,160,814 507,192 10,253,057 7,639,701
Income tax provision 439,088 177,050 4,082,000 2,995,625
Net income $721,726 $330,142 $6,171,057 $4,644,076
Earnings per share:
Basic $0.11 $0.05 $0.92 $0.70
Diluted $0.10 $0.05 $0.88 $0.66
number of common
Basic 6,680,493 6,645,667 6,680,493 6,645,667
Diluted 7,003,686 7,008,380 7,003,686 7,008,380