Sport Chalet, Inc. reported that sales of winter related merchandise plummeted 32.1 percent in the fourth quarter ended April 1, contributing to a 16.6 percent decline in total net sales during the quarter. Net sales for the quarter reached $81.9 million, from $98.2 million, down $16.3 million from the fourth quarter of fiscal 2011.

“The nearly unprecedented warm and dry winter weather we experienced in the third quarter continued into the fourth quarter and significantly affected our sales and profitability,” said Chairman and CE) Craig Levra. “We are encouraged, however, that our efforts to re-align our business model in light of the economic slowdown, and our commitment to be first to market with performance, technology and lifestyle merchandise, to expand our specialty brands and to emphasize the expertise of our team, has strengthened our underlying core business. Our comparable store sales increased 2.8 percent for the nine weeks ended June 3, 2012 and with a more normal winter, we believe the consistent improvements we have made to our business over the past few years have positioned us to return to profitability for fiscal 2013.”

The decrease in sales was primarily due to the extra week in the fourth quarter of fiscal 2011 that contributed $9.7 million to sales in that quarter. Excluding the extra week in the fourth quarter of fiscal year 2011, net sales decreased $6.6 million, or 7.5 percent, primarily due to a comparable store sales decrease of $4.4 million, or 5.3 percent, a store closure decrease of $2.0 million, and an increase in the usage of the retailer’s customer relationship management program, Action Pass, which requires sales be reduced as points are earned, partially offset by an increase in online business of 11.5 percent.

The comparable store sales decrease was due to the unseasonably warm and dry winter weather, which significantly affected snowfall at the resorts most frequented by customers, as previously announced. This resulted in a 32.1 percent sales decrease in winter related merchandise, which was partially offset by a 2.6 percent sales increase in non-winter categories. Online sales of winter related merchandise decreased 27.7 percent while online sales of non-winter categories increased 56.9 percent.

Gross profit as a percent of sales declined 510 basis points to 23.9 percent compared with the fourth quarter of the prior year primarily as a result of the decrease in sales as well as a decrease in sales of winter rentals and repairs, which have higher margins.
Selling, general and administrative expenses (SG&A) as a percent of sales slightly increased to 25.5 percent from 25.4 percent in the same period last year, primarily due to the decrease in sales.

Net loss for the quarter ended April 1, increased to $3.8 million, or 27 cents per diluted share, compared to net income of $300,000, or 2 cents per diluted share, for the quarter ended April 3, 2011.

“Our company has developed amazing resiliency, having weathered the housing crisis which began in California in 2007, the financial meltdown resulting from the housing crisis in 2008, the credit crisis of 2009, the foreclosure and unemployment crisis in the western United States in 2010 and now one of the worst winters on record,” noted Levra. “No other retailer in America has been “stress-tested” more than Sport Chalet. I am very proud of our Experts who have helped the company work through these challenges and appreciate the support from our customers, vendors and business partners. This is why we believe our future is bright, and I am excited to announce our first new store since 2008 is scheduled to open in May 2013.”

The company currently plans to open a store in May 2013 in Downtown Los Angeles. Sport Chalet will be an anchor tenant at Brookfield Office Properties' FIGat7th, the destination retail center at the intersection of Figueroa Street and 7th Street undergoing a $40 million redevelopment program. The store will occupy 26,800 square feet of space at the lower courtyard level, and will join City Target as the first new anchors at the redeveloped FIGat7th. This store will open with the next generation design of enhanced displays, fixtures, and graphics to reinforce its brand and technical merchandise and service offerings.
 

Sport Chalet, Inc.

Consolidated Statements of Operations (Unaudited)





Fiscal year

2012 2011 2010

(in thousands, except per share amounts)




Net sales $ 349,883 $ 362,483 $ 353,695
Cost of goods sold, buying and occupancy costs 254,510 260,131 258,873
Gross profit 95,373 102,352 94,822




Selling, general and administrative expenses 89,203 92,647 85,894
Depreciation and amortization 9,450 10,351 12,644
Impairment charge — — 10,935
Loss from operations (3,280) (646) (14,651)




Interest expense 1,790 2,366 2,762
Loss before income taxes (5,070) (3,012) (17,413)




Income tax provision (benefit) 2 3 (9,139)
Net loss $ (5,072) $ (3,015) $ (8,274)




Loss per share:


Basic and diluted