Sport Chalet, Inc. reported that sales for the company’s fiscal fourth quarter increased 13.3% to $89.7 million from $79.2 million for the same period last year. Sales from four new stores contributed $5.7 million, while comparable store sales for the quarter increased 5.7%. Management attributed the increase in total and comparable store sales was primarily a result of late winter weather, which further supported the sales of winter related products. Comparable store sales excluding winter related products increased 5.2%.

Gross profit as a percent of sales decreased to 30.2% from 30.8% in the fourth quarter of last year. The 60 basis point decrease was primarily due to increased markdowns on winter related merchandise. Selling, general and administrative expenses as a percent of sales improved by 230 basis points to 27.0% from 29.3% last year. The decrease was a result of improvements achieved in the Company’s mature stores as well as higher litigation reserves from the fourth quarter of last year which were not repeated in fiscal 2006.

Net income increased 126.9% to $1.6 million, or 12 cents per diluted share, compared to $722,000, or 5 cents per diluted share, for the fourth quarter last year.

Craig Levra, Chairman and CEO, stated, “We are very happy to have finished out the year with a strong fourth quarter. We are proud of our ability to not only drive top line growth but also greatly improve our profitability. While late winter weather in our region helped drive sales for the quarter, we also generated solid sales increases in our non-winter products which exemplifies our overall strategy of being less weather and geography dependent. Additionally, as our stores matured we were able to intensively manage our operating expenses at the store level, which contributed to a reduction of our SG&A as a percent of sales. Lastly, during the quarter we successfully opened our 40th store, which is located in Foothill Ranch, which further builds out our presence in Orange County, California.”


Full Year Results

Sales for the fiscal year increased 11.0% to $343.2 million from $309.1 million last year. Comparable store sales increased 1.9% for the year after last year’s 5.7% gain. Excluding winter related products, comparable store sales increased 3.3%. Four new stores were opened in fiscal 2006 compared to five new stores opened in fiscal 2005.

Gross profit as a percent of sales for the fiscal year was even at 30.9%. Selling, general and administrative expenses as a percent of sales were 29.6%, including $8.7 million related to the recapitalization which occurred in the second quarter of fiscal 2006. Excluding the effect of the recapitalization, SG&A expenses as a percent of sales was 27.1% in fiscal 2006. This compares to 27.5% in fiscal 2005.

Net loss for fiscal 2006 was $87,000, or a penny per diluted share, including the after-tax charge of $7.8 million, or 56 cents per diluted share, related to the recapitalization. Excluding the effects of the recapitalization, net income increased 25.6% in fiscal 2006 to $7.8 million, or 55 cents per diluted share, from $6.2 million, or 44 cents per diluted share, in fiscal 2005.

Craig Levra, Chairman and CEO, stated, “I am extremely pleased with our results for the full fiscal year. In addition to generating record top and bottom line results, excluding the effects of the recapitalization, we also achieved many milestones during the year. Specifically, we entered a third state with the opening of three stores in Arizona in one day. We also completed our recapitalization plan which increases the certainty of our future and enables us to maintain our focus on long-term expansion. Additionally, we continued to make significant investments in our infrastructure and back office systems which are helping to create a strong foundation for future growth. Our ability to accomplish these initiatives while performing at the company’s highest level in our history is a direct result of our entire team’s dedication and strong work ethic. We believe our unique store concept and ability to meet the needs of our customers will drive our efforts in the future and we look forward to building on our successes in fiscal 2007.”

              Sport Chalet, Inc.

                    Consolidated Statements of Operations

                                            Year ended March 31,
                                   2006            2005          2004

    Net sales                  $343,204,097    $309,089,551  $264,236,923
    Cost of goods sold,
     buying and occupancy
     costs                      237,137,009     213,428,269   184,046,770
    Gross profit                106,067,088      95,661,282    80,190,153

    Selling, general and
     administrative expenses    101,534,075      85,144,702    72,360,528
    Income from operations        4,533,013      10,516,580     7,829,625

    Interest expense                266,910         263,523       189,924
    Income before taxes           4,266,103      10,253,057     7,639,701

    Income tax provision          4,353,292       4,082,000     2,995,625
    Net income (loss)              $(87,189)     $6,171,057    $4,644,076

    Earnings (loss) per share:
      Basic                          $(0.01)          $0.46         $0.35

      Diluted                        $(0.01)          $0.44         $0.33

    Weighted average number
     of common shares
     outstanding:
        Basic                    13,505,952      13,360,986    13,291,334
        Diluted                  13,505,952      14,007,372    14,016,760