Sport Chalet Fiscal Q3 Earnings Out Pace Sales

Sport Chalet, Inc. fiscal third quarter sales increased 15.1% to $114.7 million from $99.7 million in the same period of 2005. The sales growth reflected nine new stores resulting in a $12.1 million, or 12.4%, increase in sales on a same day basis. Same store sales on a same day basis increased $3.5 million, or 3.8%.

Gross profit as a percent of sales increased to 32.5% from 31.9% primarily as a result of the leverage created by increased same store sales against relatively fixed occupancy costs.

Selling, general and administrative (“SG&A”) expenses as a percent of net sales remained relatively flat at 26.4% compared to 26.5% for the same period last year as leverage created by increased same store sales was partially offset by expenses associated with new stores which take time to reach operating efficiency. Overall, SG&A expenses increased $3.9 million over the year ago quarter primarily due to the additional stores.

Net income for the third quarter increased 31.4% to $4.0 million, or 28 cents per diluted share, compared to net income of $3.0 million, or 22 cents per diluted share, for the third quarter last year.

Craig Levra, Chairman and CEO, stated, “The entire Sport Chalet team turned in a terrific performance during the third fiscal quarter. Our 15.1% top line growth and 3.8% same store sales increase reflect the continued successful expansion of our store base as well as positive customer response to our merchandise mix and value-added services. Our employee training programs are working well and continuing to allow us to offer the “expert” service our customers expect when shopping at Sport Chalet. We held three successful grand openings during the quarter which further built out our presence in California. In addition, we are happy with the progress we continue to make in our systems initiatives. We remain excited about our strategic growth plan and are well positioned going into the fourth quarter of fiscal 2007.”

For the nine months ended December 31, 2006, sales increased 14.5% to $290.4 million from $253.5 million for the nine months ended December 31, 2005. Sales from nine new stores contributed a $28.0 million, or 11.4%, increase in sales on a same day basis. Same store sales on a same day basis increased $7.6 million, or 3.2%.

Gross profit as a percent of sales increased to 31.5% for the nine months ended December 31, 2006 from 31.2% in the same period last year. SG&A, excluding the effects of last year's recapitalization, as a percent of sales for the nine-month period increased to 27.8% from 27.1% in the comparable period last year. SG&A for the nine-month period reflects higher utility costs due to rate increases of approximately $0.5 million and increased corporate labor of approximately $1.1 million to facilitate the Company's growth plans.

Net income increased 1.7% to $6.2 million for the nine months ended December 31, 2006 from $6.1 million for the nine months ended December 31, 2005, excluding the effects of last year's recapitalization. Diluted earnings per share remained relatively flat at 43 cents for the nine months ended December 31, 2006 compared to 44 cents for the nine month period a year ago. Including the after-tax charge of $7.8 million related to the Company's recapitalization, net loss for the nine months ended December 31, 2005 was $1.7 million, or $0.13 per share.

Craig Levra, Chairman and CEO, concluded, “During the past year we have focused on opening new stores that strengthen our presence in key existing markets. As we continue to create density in our current markets as well as expand into our fourth state, Utah, over the course of calendar 2007, we are committed to offering the best in performance, technical and lifestyle merchandise and services to meet the needs of our customers. We look forward to maintaining the momentum of the past year and continuing on our growth track.”

Sport Chalet currently anticipates opening six to eight new stores during calendar 2007 as well as completing two store remodels. The majority of the new stores will be focused on adding density to current markets, namely Southern California and Arizona. The Company also anticipates entering a new market in calendar 2007 with a store opening planned in Utah.