Sport Chalet Inc. reported sales decreased 2.8 percent to $81.5 million for the first fiscal quarter of 2014 from $83.8 million in the same period last year.
Sales were lower primarily due to a sales decrease of $1.1 million from the closure of two underperforming stores, a 31.0 percent sales decrease in its Team Sales Division from the departure of sales representatives, and a decrease in comparable store sales. The declines were offset by a 37.6 percent increase in online sales. The company has hired new sales reps for Team Sales, and the division's dedicated website has been delivering promising results following an upgrade implemented last quarter.
Comparable store sales decreased 0.7 percent for the first quarter ended June 30, compared to the same period of last year, reflecting a weaker-than-anticipated retail sales environment. In response, Sport Chalet increased its promotional activity to stimulate sales. The promotions had an impact on gross margin, which decreased to 26.3 percent from 27.9 percent in the first quarter of last year.
Selling, general and administrative expenses as a percent of sales increased to 26.5 percent from 24.7 percent in the first quarter of last year, primarily due to increases in advertising, investments to support the growth of the online business, and labor-related expenses.
The company's net loss for the first quarter of 2014 was $2.8 million, or $0.20 per diluted share, compared to net income of $0.1 million, or $0.01 per diluted share, in the first quarter of last year.
Expansion and extension of bank credit facility
On Aug. 14, 2013, the company amended its credit facility with its existing bank, Bank of America, N.A., increasing its previous $65.0 million credit facility (which had a seasonal increase to $70.0 million from September 1 to December 31 of each year), which was due to expire in October 2014, to a $75.0 million credit facility. The expanded credit facility allows the company to borrow on more favorable terms and conditions with an increase in availability, a reduction in interest rates and an extended expiration date to August 2018.
“Our first quarter sales were lower than expected, which was disappointing following the positive momentum we experienced at the end of fiscal 2013,” said Craig Levra, chairman and CEO. “We are closely monitoring the uneven retail environment and will continue to respond as appropriate with promotional activities, including radio advertising and Action Pass member outreach.”
“We are making solid headway in implementing our recently announced strategic initiatives, which are designed to drive sales by reinforcing the Sport Chalet brand as the specialty sports retailer of choice. We have added new drop ship vendors to our online store and are adding mobile devices in stores to give customers access to the broadest selection of merchandise and the most seamless shopping experience across all of our channels.”
“We have taken significant costs out of our business and continue to evaluate opportunities to reduce our cost structure in a targeted and prudent manner. With our expanded, five-year $75.0 million credit facility, we have ample resources to execute our plan. When our customers return in full-force, we expect that the operating leverage we have built into our business model, and the strategic initiatives we are implementing, will result in improved financial performance.”
Sport Chalet has 52 stores in Arizona, California, Nevada and Utah; an online store at www.sportchalet.com; a Team Sales Division; and offers more than 50 specialty services for the sports enthusiast, including online same day delivery, climbing, backcountry skiing, ski mountaineering, avalanche education, and mountain trekking instruction, car rack installation, snowboard and ski rental and repair, Scuba training and certification, Scuba boat charters, team sales, gait analysis, baseball/softball glove steaming and lacing, racquet stringing, and bicycle tune-up and repair at its store locations.