Sports Chalet Reports Lower Sales, Margins in Fiscal Q2

 

Sales were lower due to a 2.5 percent comparable store sales decrease, a sales decrease of $1.8 million from the closure of three underperforming stores, and lower sales in the Team Sales Division due to changes in personnel. These declines were partially offset by a 32.4 percent increase in Online sales and the contribution of one new store opened at the end of the first quarter. The comparable store sales decline was reflective of general consumer caution and an uneven retail environment.
 

Gross profit decreased $2.7 million, or 10.8 percent, and as a percent of sales decreased to 25.9 percent from 27.6 percent. The decrease in gross margin reflects an increase in promotional activity to stimulate sales as well as the decrease in sales.
 

Selling, general and administrative (“SG&A”) expenses increased $0.9 million, or 4.1 percent, due primarily to higher advertising spending in the quarter to promote sales. As a percent of sales, SG&A increased to 26.3 percent from 24.0 percent in the same period last year.
 

The company's net loss for the second quarter of fiscal 2014 was $3.0 million, or $0.21 per diluted share, compared to net income of $0.8 million, or $0.05 per diluted share, in the second quarter of last year.
 

“Our second quarter had a disappointing start, as sales trends were weak in July and August, but turned positive in September on a comparable basis,” said Craig Levra, Chairman and CEO. “Sales trends have continued to improve as we progressed into fall, and our Team Sales Division is also beginning to move into positive territory.
 

“Since opening in June, our next generation store in Downtown Los Angeles has delivered significantly better than average sales per square foot and gross margin than the chain as a whole. The flexible store format allows us to continually adapt the highly tailored merchandise mix to appeal to our Downtown customer base, and early results have exceeded our expectations. With additional capital, we believe there is enormous sales growth potential in rolling out this next generation format across our existing store base through a strategic remodel program, and opening new next generation stores in both our core markets and new geographies.

 

 

“We have taken significant steps over the past year to accelerate our growth strategy, including the recent engagement of a financial advisor to help us find the right path to new growth capital, as well as the addition of new talent to our Board of Directors and our Online Division. We continue to navigate the choppy retail environment, and we are concentrating all of our efforts to maximize sales while containing costs. We are optimistic that our premium brands and quality merchandise, best-in-class service, and our 'Expert' staff engagement with customers position us well for success in the coming holiday selling season.”

For the first half of fiscal 2014, sales decreased 4.0 percent to $168.3 million from $175.3 million for the first half of the prior fiscal year. Comparable store sales decreased 1.7 percent in the first half of 2014.

 

 

Gross profit decreased $4.6 million, or 9.5 percent, and as a percent of sales decreased to 26.1 percent from 27.7 percent for the first half of fiscal 2013.
 

SG&A expenses increased $1.8 million, or 4.1 percent for the first half of 2014. As a percent of sales, SG&A increased to 26.4 percent from 24.3 percent in the same period last year.

 

 

The company's net loss for the first half of 2014 was $5.9 million, or $0.41 per diluted share, compared to net income of $0.9 million, or $0.06 per diluted share, in the first half of fiscal 2013.

 

Sport Chalet, Inc.
Consolidated Statements of Operations
	13 weeks ended		26 weeks ended
	September 29, 2013	September 30, 2012	September 29, 2013	September 30, 2012
	(in thousands, except per share amounts)
Net sales	$ 86,725	$ 91,452	$ 168,250	$ 175,301
Cost of goods sold, buying and occupancy costs	64,232	66,233	124,292	126,714
Gross profit	22,493	25,219	43,958	48,587
Selling, general and administrative expenses	22,819	21,924	44,423	42,662
Depreciation and amortization	2,167	2,041	4,333	4,110
(Loss) income from operations	(2,493)	1,254	(4,798)	1,815
Interest expense	545	492	1,086	950
(Loss) income before income taxes	(3,038)	762	(5,884)	865
Income tax provision	2	2	2	2
Net (loss) income	$ (3,040)	$ 760	$ (5,886)	$ 863
(Loss) earnings per share:
Basic	$ (0.21)	$ 0.05	$ (0.41)	$ 0.06
Diluted	$ (0.21)	$ 0.05	$ (0.41)	$ 0.06