Sport Chalet's third-quarter earnings plummeted as it continued adding stores even as plunging home prices, wildfires, late snow and even the writer's strike cut into sales in its core Southern California market. The upscale Southern California retailer said earnings fell 85.7% to $574,000, or 4 cents a share, from $4.0 million, or 28 cents a year ago.

 

The decline included a charge of $2.1 million, or 9 cents per share, related to improvements made at two leased stores in California. Comp store sales fell 6.9%, while total net sales rose just 1.6% to $116.6 million. Gross profit as a percentage of net sales was 30.2% compared to 32.5% for the third quarter of last year. The decline was attributed to the opening of four stores that increased rent and advertising as a percentage of sales. SG&A expenses, as a percentage of sales, increased to 26.2% from 23.9% last year.

 

The company said it reduced its average inventory per store by 10% by the end of the quarter compared to the same quarter in 2007 and was able to close an outlet store in Montclair, CA thanks to better logistics. The company is on track to complete installation of an SAP financial and merchandizing system that could serve a company four times its size by spring.

 

CFO Howard Kaminsky said that while the return of snow in December had boosted snow sports sales, “we are not seeing the same pickup in non-winter merchandise that we historically experienced when customers come in to purchase their winter gear.”

 

The company is focusing on boosting team sales and adding Surf Camps at some Southern California stores to boost sales. For the full fiscal 2008, the company expects to report a slight net loss on a moderate increase in net sales over FY 2007 and a 2% to 4% decline in comp sales. In calendar 2008, Sport Chalet expects to open three to four new stores in California and Arizona, including West Los Angeles.