Sport Chalet’s Q3 Same-Store Sales Dip 2.0 Percent

The decrease in comparable store sales is primarily due to the unseasonably warm and dry winter weather, which significantly affected snowfall at the resorts most frequented by the company's customers. This resulted in a 21.8 percent sales decrease in winter related merchandise, which was partially offset by a 6.6 percent sales increase in non-winter categories. Online sales of winter related merchandise decreased 13.0 percent while sales of non-winter categories increased 30.9 percent. The decrease in comparable store sales was offset by an increase of $5.2 million due to a calendar shift, causing net sales to increase 1.5 percent to $97.2 million for the third quarter of fiscal 2012 from $95.8 million for the third quarter of fiscal 2011. The impact of the calendar shift is primarily the result of the week following Christmas being included in the third quarter of fiscal 2012 compared to the fourth quarter in fiscal 2011.

Gross profit as a percent of sales decreased to 27.1 percent from 27.5 percent for the third quarter of last year primarily due to an increase in promotional activity from the week following Christmas being included in the third quarter of fiscal 2012 compared to the fourth quarter in fiscal 2011. Selling, general and administrative (SG&A) expenses as a percent of sales decreased slightly to 25.1 percent from 25.3 percent in the same period last year, primarily due to the increase in leverage from the increase in sales.

The company's net loss for the quarter ended January 1, 2012 increased to $1.0 million, or $0.07 per diluted share, from a net loss of $0.9 million, or $0.06 per diluted share, for the quarter ended December 26, 2010.

Craig Levra, chairman and CEO, stated, “After three consecutive quarters of positive and sequential improvements in our comparable store sales, the unseasonably warm and dry winter weather we experienced in the third quarter impacted this trend and caused a 2.0 percent decrease in comparable store sales. We are working diligently to minimize the negative effects of the weather while capitalizing on the merchandise categories that respond well to warm and dry conditions.”

Nine-Month Results

For the nine months ended January 1, 2012, net sales increased 1.4 percent to $268.0 million from $264.3 million for the first nine months of the prior fiscal year, primarily due to a comparable store sales increase of 1.0 percent, an online sales increase of 26.1 percent, and a calendar shift increase of $4.0 million.

Gross profit as a percent of sales increased to 28.3 percent from 28.0 percent for the first nine months of the prior fiscal year, primarily due to a decrease in markdowns and an improvement in inventory shrinkage. SG&A expenses as a percent of sales decreased to 25.5 percent from 25.6 percent a year ago.

The company's net loss for the nine months ended January 1, 2012 was reduced by $2.1 million to $1.3 million, or $0.09 per share, from a net loss of $3.3 million, or $0.23 per share, for the nine months ended December 26, 2010.

Liquidity

On January 1, 2012, the company's bank credit facility had a borrowing capacity of $65.0 million, of which the Company utilized $31.1 million (including a letter of credit for $2.6 million) and had $33.9 million in availability compared to $27.3 million for the same period ended last year. The amount of availability fluctuates due to seasonal changes throughout the year.

Fourth Quarter of Fiscal 2012

The fourth quarter of fiscal 2012 may be negatively impacted by i) a further decline in comparable store sales due to continued warm and dry weather; ii) a relative increase in the amount of winter related merchandise sold at lower margins during the quarter compared to the same period last year; iii) the potential need for future retail price reductions on the additional remaining winter inventory; iv) the week following Christmas, a high sales volume week, being included in the third quarter of fiscal 2012 rather than the fourth quarter as in fiscal 2011; and v) the fourth quarter of fiscal 2012 consists of one less week than the fourth quarter of fiscal 2011. 

Fiscal Calendar

The company's fiscal year consists of 52 or 53 weeks, ends on the Sunday nearest to the last day of March and is named for the calendar year ending closest to that date. Fiscal 2011 was a 53 week year and thus included one extra week in the fourth quarter and ended on April 3, 2011. As a result of the extra week in fiscal 2011, the fiscal quarters of 2012 may not compare to fiscal 2011 due to the calendar shift of sales related to holiday promotions. The results for the 13 and 39 weeks ended January 1, 2012 are compared to the 13 and 39 weeks ended December 26, 2010, except for comparable store sales results, which compare the 13 and 39 weeks ended January 1, 2012 to the 13 and 39 weeks ended January 2, 2011.

Sport Chalet has 54 stores in California, Nevada, Arizona and Utah; Sport Chalet online at sportchalet.com; and a Team Sales division.