Sport Chalet, Inc. reported sales decreased 1.1 % in its fourth quarter ended March 30, to $96.8 million a year ago, with comps down 8.6%. The net loss was $2.8 million, or 20 cents a share, compared to earnings of $881,000, or 6 cents, a year ago. In April, Sport Chalet said it would post a loss in the 20 cents to 25 cents range due to the “challenging sales environment.”


Gross margins shrank to 26.3% from 29.3% due to promotional activity. SG&A expenses increased to 27.5% from 24.5%, partly reflecting the opening of seven stores.


On a conference call with analysts, company Chairman and CEO Craig Levra said that as a predominately California-based company, Sport Chalet's customers have been hurt by rising gas prices and the mortgage crisis more so than other parts of the country.


“It is not a case of values but a sense of wealth being lost,” explains Levra. “People who took out second mortgages for example, or got overextended. And a lot of people who were fairly intelligent individuals made mistakes by getting themselves into a home larger than they could afford. That is certainly a problem. Plus, obviously we have stores in markets that were predicated on a lot of new housing starts. And those new housing starts have slowed as you might expect.”


Although the chain scored a “really great launch” with Under Armour footwear and some skate brands “continue to see growth,” no category was particularly strong.


Said Levra, “We did okay on junior apparel. We did okay on men's apparel. Fitness was fairly decent. We had some other categories that experienced some pretty significant drop-offs.”


As a result, Sport Chalet applied aggressive markdowns early in the quarter to finish the year with inventories down 1.3% – despite opening 7 stores. The retailer also focused on several long-term projects. On the technology side, it launched its SAP financial and merchandising systems, and completed the roll-out of enterprise selling in all its stores. New hires included a director of team sales, Brad Morton, and an EVP and CMO, Tom Tennyson. At the store level, its Action Pass preferred customer program was rolled out last November and now has 300,000 members.


For 2009, new stores are planned for west Los Angeles, Concord, and Menifee, CA; and Queen Creek, AZ. Its oldest store in La Canada, CA, will relocate to a 45,000-square-foot prototype across the street.


Sport Chalet's overall goal for 2009 will be to reestablish its specialty retail leadership by being first to market with performance, technical, and lifestyle merchandise and services. As an example, Levra pointed to Sport Chalets' new skate concept shop named T59.


Levra did note that the rising fuel costs and the movement toward “staycations,” or vacationing near home, might present opportunities for walking shoes, cycling and backyard games. He said Sport Chalet remains committed to finding the best in performance technology and lifestyle merchandise.


“Our customers expect us to find those new items, unique items, and be first to market with performance, technical, and lifestyle merchandise, and our team is doing a good job aggressively attacking those opportunities,” says Levra. “There is not a Heelys; there is not a scooter; there is nothing like that out there on the horizon today as we see it. That doesn't mean there won't be one.”