Sport Chalet, Inc. cut its losses, improved its gross margins and reduced borrowing in the fiscal third quarter ended Dec. 26, 2010 despite essentially flat sales.
Company Chairman and CEO Craig Levra said that while macroeconomic conditions remained difficult in the four western states where the company operates, team sales and e-commerce divisions grew. Sports Chalet operates 55 stores in California, Nevada, Arizona and Utah a territory that includes some of the hardest hit housing markets in the country.
SPCH lost $900,000, or 6 cents per share, in the quarter compared to a loss of $3.8 million, or 27 cents per share, in the 2009 fiscal third quarter, when the retailer took an impairment charge of $10.9 million.
The company also reduced the outstanding balance on its revolving credit facility to $41.9 million from $56.2 million a year earlier leaving it with $27.0 million of availability at quarter’s end.
Sales edged up 0.6% to $95.8 million in fiscal Q3 from $95.3 million in the prior-year period as growth in the e-commerce and team sales divisions were partially offset by a 0.4% decrease in comparable store sales. The decline in comps was attributed to fewer promotions and a weak economy, partially offset by favorable weather.
Gross profit as a percent of sales increased 230 basis points to 27.5%, primarily due to a decrease in markdowns from promotional activity and lower rent expense from successful negotiations with landlords. SG&A as a percent of sales increased 220 basis points to 25.3%, reflecting an increase in labor for store payroll in anticipation of stronger sales than experienced.
The company closed the quarter with $108.1 million in merchandise inventories, up 11.1% from a year earlier. Cash flow from operations swung from a negative $7.3 million to a positive $15.3 million, due primarily to a $20.4 million increase in accounts payable and better inventory management.
