Sport Chalet Sees Late Winter Boost Q1 Sales…

Sport Chalet, Inc. started their 2007 fiscal year with a bang, posting a double-digit sales increase in the first quarter ended July 2. SPCH said the gain was due to unusually late snowfall in local resorts, which drove demand for winter related items early in the quarter followed by unusually warm weather which drove summer merchandise sales late in the quarter. This sales boost allowed net income to out-pace sales by a two-to-one margin. In addition, the retailer opened five new stores since the first quarter last year, which contributed $6.9 million in sales, while two additional days in this most recent quarter added $2.6 million in sales.

California’s cold April allowed several major resorts to remain open longer than usual and boosted sales of ski and snowboard merchandise. Sport Chalet did see some markdown activity, but management said that the company is going into the summer with the cleanest winter inventories it has experienced in years, in spite of a slow winter this year.

May sales reportedly “flattened out,” but June kicked in with strong sales of summer merchandise, particularly swimwear, sandals, lighter-weight apparel, and water sports.

Gross margins declined due to additional markdowns taken to stimulate sales of slow moving merchandise in select departments while the SG&A expense improvement was caused by savings on workers compensation insurance as well as higher litigation reserves from the first quarter of last year which were not repeated this year.

Sport Chalet management said it was pleased with the roll-out of the “Sport Chalet Action Pass,” a new customer relationship management tool. They decided to learn more about their newest markets first and rolled the plan out in its Arizona stores before looking at California.

“Having just begun this program seven months ago, were pleased with the amount of meaningful data weve already generated. And we have already started to develop some clear patterns in how our customers are shopping,” said Craig Levra, Sport Chalet’s CEO, during a conference call with analysts. “As Ive said in the past, the valuable information this program provides will not only allow us to better understand individual customer behavior, but will also teach us more about our stores and business model.”

SPCH is also in the process of implementing two new IT systems that will help Sport Chalet support future growth. First, Sport Chalet has rolled-out new POS systems to two-thirds of its store base and anticipates finishing with the remaining stores by the end of August. The new systems have several advantages, including faster training of new cashiers, faster check-out times, lower shrink rates, and the registers are set up to take advantage of the Action Pass. Second, Sport Chalet is close to deciding on a new merchandising system that will streamline much of the planning process.

The company’s long-term store expansion strategy continues to be focused on entering new markets, but this year it will emphasize adding density in California.

SPCH opened its forty-first store in Thousand Oaks, Calif. and is on track to open its next four California stores starting with the Vacaville store this month followed by stores in San Marcos, Norco, and San Jose in the third quarter. The Torrance and Mission Valley remodels continue on schedule and the company anticipates having 64% of its store base either new or newly remodeled at the end of this year.