Sport Chalet Swings to Fiscal Fourth Quarter Profit

June 6, 2011
SGB Update

Marking its first profitable quarter in the 13 quarters, Sport Chalet netted a profit of $300,000, or 2 cents a share, in its fiscal fourth quarter ended April 3, against a loss of $300,000, or 2 cents, in the year-ago quarter. Sales increased 8.8 percent to $98.2 million.


The sales gain was primarily due to the extra week in the latest fourth quarter, which contributed $5.9 million to sales. Excluding the extra week, sales increased 2.4 percent due to a 1.3 percent comp increase on top of an increase of 5.7 percent for the fourth quarter of last year. Also driving the gains was a 60 percent jump in online sales and a 24 percent climb in Team Sales division revenues.


Gross margins improved to 29.0 percent of sales in Q4 from 27.7 percent in the year-ago quarter, primarily due to lower rent expense. SG&A expenses as a percent of sales increased to 25.4 percent from 24.3 percent, primarily reflecting increases in labor and workers compensation expense. The increase in labor for store staff helped drive the improvement in comparable store sales, the company noted.


In an exclusive interview with Sports Executive Weekly, Sport Chalet  Chairman and CEO Craig Levra said the notable improvement for the retailer came despite still challenging economic conditions in the markets the retailer serves.  A budget crisis continues to impact consumer spending in California while sluggish economies continue in Nevada and Arizona.  The housing crisis also continues to weigh on many parts of the region. For instance, Levra noted that studies show that about half of Arizona’s homes and two-thirds of Nevada’s homes are “underwater,” or have a negative equity position.


“Im proud of my whole team,” said Levra. “This has been three really difficult years and weve had no external help. Everybody’s been working their tails off to improve and so Im happy weve got 3,200 Sport Chalet experts and Im proud of each one of them.”
Levra noted that SPCH increased its store staff and customer service to allow associates to focus on an expanding assortment of specialty brands, which resulted in a higher sales per transaction. Among the new brands introduced in recent months at select or all doors over the last year included Vibram FiveFingers running shoes, Kuhl mountain clothing, Icebreaker baselayer apparel, True Fitness, Nemo Tents, Santa Cruz mountain bikes, Grivel moutainteering gear, GoPro wearable digital cameras, and GoalZero solar powered battery chargers.

“Our customers really demand the latest in performance, technology, and lifestyle merchandise,” said Levra. “That’s one of the key factors that really make us different.”


Sales for the full year increased 2.5 percent to $362.5 million.  Excluding the extra week, sales increased 0.8 percent, due to online and Team Sales divisions sales increases of 110 percent and 15 percent, respectively.  Comps dipped 0.4 percent.
The full year net loss was reduced to $3.0 million, or 21 cents per share, from a loss of $8.3 million, or 59 cents per share, in the prior year.  Excluding non-cash impairment charges and the effect of income taxes, the prior-year loss would have been $6.5 million, or 46 cents per share.


Gross margins in the year improved to 28.2 percent of sales from 26.8 percent in the prior year primarily due to lower rent expense.  SG&A as a percent of sales increased to 25.6 percent from 24.3 percent for fiscal 2010, primarily from increased labor, which helped increase the average sales transaction by 2.0 percent.


As of April 3, the credit facility had a borrowing capacity of $65.0 million, of which the company utilized $42.5 million (including a letter of credit of $1.6 million) and had $16.0 million in availability, $10.2 million above the EBITDA covenant availability requirement of $5.8 million. With the expanded credit facility in place, the company said the increased availability provides the company with the financial flexibility to pursue its operating and strategic initiatives.


For the current fiscal year, Levra said the company continues to further micro-merchandise by utilizing Action Pass data from its customer rewards program, improve the functionality of sportchalet.com, and refine its store strategy.


“These steps combined with our improving operating performance position us for future growth,” said Levra. “Our company continues to evolve and adapt, is markedly better and we are excited about our future.”


Sport Chalet has 55 stores in California, Nevada, Arizona and Utah.

Sport Chalet Swings to Fiscal Fourth Quarter Profit

SGB Update

Marking its first profitable quarter in the 13 quarters, Sport Chalet netted a profit of $300,000, or 2 cents a share, in its fiscal fourth quarter ended April 3, against a loss of $300,000, or 2 cents, in the year-ago quarter. Sales increased 8.8 percent to $98.2 million.


The sales gain was primarily due to the extra week in the latest fourth quarter, which contributed $5.9 million to sales. Excluding the extra week, sales increased 2.4 percent due to a 1.3 percent comp increase on top of an increase of 5.7 percent for the fourth quarter of last year. Also driving the gains was a 60 percent jump in online sales and a 24 percent climb in Team Sales division revenues.


Gross margins improved to 29.0 percent of sales in Q4 from 27.7 percent in the year-ago quarter, primarily due to lower rent expense. SG&A expenses as a percent of sales increased to 25.4 percent from 24.3 percent, primarily reflecting increases in labor and workers compensation expense. The increase in labor for store staff helped drive the improvement in comparable store sales, the company noted.


In an exclusive interview with Sports Executive Weekly, Sport Chalet  Chairman and CEO Craig Levra said the notable improvement for the retailer came despite still challenging economic conditions in the markets the retailer serves.  A budget crisis continues to impact consumer spending in California while sluggish economies continue in Nevada and Arizona.  The housing crisis also continues to weigh on many parts of the region. For instance, Levra noted that studies show that about half of Arizona’s homes and two-thirds of Nevada’s homes are “underwater,” or have a negative equity position.


“Im proud of my whole team,” said Levra. “This has been three really difficult years and weve had no external help. Everybody’s been working their tails off to improve and so Im happy weve got 3,200 Sport Chalet experts and Im proud of each one of them.”
Levra noted that SPCH increased its store staff and customer service to allow associates to focus on an expanding assortment of specialty brands, which resulted in a higher sales per transaction. Among the new brands introduced in recent months at select or all doors over the last year included Vibram FiveFingers running shoes, Kuhl mountain clothing, Icebreaker baselayer apparel, True Fitness, Nemo Tents, Santa Cruz mountain bikes, Grivel moutainteering gear, GoPro wearable digital cameras, and GoalZero solar powered battery chargers.

“Our customers really demand the latest in performance, technology, and lifestyle merchandise,” said Levra. “That’s one of the key factors that really make us different.”


Sales for the full year increased 2.5 percent to $362.5 million.  Excluding the extra week, sales increased 0.8 percent, due to online and Team Sales divisions sales increases of 110 percent and 15 percent, respectively.  Comps dipped 0.4 percent.
The full year net loss was reduced to $3.0 million, or 21 cents per share, from a loss of $8.3 million, or 59 cents per share, in the prior year.  Excluding non-cash impairment charges and the effect of income taxes, the prior-year loss would have been $6.5 million, or 46 cents per share.


Gross margins in the year improved to 28.2 percent of sales from 26.8 percent in the prior year primarily due to lower rent expense.  SG&A as a percent of sales increased to 25.6 percent from 24.3 percent for fiscal 2010, primarily from increased labor, which helped increase the average sales transaction by 2.0 percent.


As of April 3, the credit facility had a borrowing capacity of $65.0 million, of which the company utilized $42.5 million (including a letter of credit of $1.6 million) and had $16.0 million in availability, $10.2 million above the EBITDA covenant availability requirement of $5.8 million. With the expanded credit facility in place, the company said the increased availability provides the company with the financial flexibility to pursue its operating and strategic initiatives.


For the current fiscal year, Levra said the company continues to further micro-merchandise by utilizing Action Pass data from its customer rewards program, improve the functionality of sportchalet.com, and refine its store strategy.


“These steps combined with our improving operating performance position us for future growth,” said Levra. “Our company continues to evolve and adapt, is markedly better and we are excited about our future.”


Sport Chalet has 55 stores in California, Nevada, Arizona and Utah.

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