Sport Chalet, Inc. reported net income declined to $881,000, or 6 cents a share, from $1.6 million, or 12 cents, a year ago, reflecting a weak California snowfall. Sales in the period ended April 1 increased 9.1% to $97.8 million from $89.7 million, with comparable sales ahead 1%.

The fourth quarter included sales from five stores opened in fiscal 2007 and one store opened in the fourth quarter of fiscal 2006 contributing $8 million. The decrease in comparable store sales was primarily a result of Southern California having the driest winter on record, which dampened the sales of winter related products. Excluding winter related products, comparable store sales increased 2.5%.

Gross profit as a percent of sales decreased to 29.3% from 30.2% in the fourth quarter of last year. The 90 basis point decrease was primarily due to increased occupancy expense as a percent of sales in new stores, as they require time to reach operating efficiency. Selling, general and administrative expenses as a percent of sales increased to 27.7% from 27.0% last year, again primarily due to the impact of new stores.

Craig Levra, Chairman and CEO, stated, “While we made solid progress towards our long-term goals during the fourth quarter, our results did not meet our expectations following our record third quarter. Unlike last year's particularly strong late snowfall, we experienced exceptionally dry weather in California, Nevada and Arizona which impacted sales of winter apparel and equipment. However, we did generate positive growth within our non-winter products and are seeing earlier and improved sales of warm weather merchandise. With the contribution of our new stores we grew our top line by a solid 9% during the quarter. Although our fourth quarter will always be driven largely by winter sports, our continuing focus on geographical expansion and extending the breadth of our merchandise assortment will mitigate any impact of unseasonable weather conditions. Despite this challenging quarter, our strategic direction is the right one for Sport Chalet, and we will continue to make progress during the coming quarters.”

Full Year Results

Sales for fiscal 2007 increased 13.1% to $388.2 million from $343.2 million from the prior year. Comparable store sales increased 2.0% for the year on top of the prior year's 1.9% gain. Excluding winter related products, comparable store sales increased 2.1%. Five new stores were opened in fiscal 2007 compared to four new store openings in fiscal 2006.

Gross profit as a percent of sales for the fiscal year was 30.9% which was unchanged from the previous year. Selling, general and administrative (“SG&A”) expenses as a percent of sales were 27.8%, compared to 29.6% in 2006, which included $8.7 million related to the recapitalization that occurred in the second quarter of fiscal 2006. Excluding the effect of the recapitalization, SG&A expenses as a percent of sales were 27.1% in fiscal 2006.

Net income for fiscal 2007 was $7.1 million, or $0.50 per diluted share. This compared to a net loss in fiscal 2006 of $87,000, or $(0.01) per diluted share, including the after-tax charge of $7.8 million, or $0.56 per diluted share, related to the recapitalization. Excluding the effects of the recapitalization, net income in fiscal 2006 was $7.8 million, or $0.55 per diluted share.

Levra continued, “This past year was an exciting year for Sport Chalet as we successfully embarked on key strategic initiatives, such as Action Pass, while opening five new stores and announcing our expansion plans into our fourth state, Utah. We are incorporating significant upgrades into our infrastructure, and our overall growth should increasingly leverage these investments over time, including our new SAP financial and merchandising system. Although the fourth quarter of the year was below plan, the overall progress we made positions us for fiscal 2008 with a strong determination to improve our performance. We have the right team and a solid plan in place to drive Sport Chalet forward into the summer months and the remainder of the fiscal year.” 

           Sport Chalet, Inc.
                      Consolidated Statements of Operations

                                                 Fiscal Year ended,
                                           2007         2006         2005

    Net sales                         $388,209,155  $343,204,097  $309,089,551

    Cost of goods sold, buying
     and occupancy costs               268,188,190   237,137,009   213,428,269
    Gross profit                       120,020,965   106,067,088    95,661,282

    Selling, general and
     administrative expenses           107,775,726   101,534,075    85,144,702
    Income from operations              12,245,239     4,533,013    10,516,580

    Interest expense                       516,332       266,910       263,523
    Income before taxes                 11,728,907     4,266,103    10,253,057

    Income tax provision                 4,630,193     4,353,292     4,082,000
    Net income (loss)                   $7,098,714      $(87,189)   $6,171,057

    Earnings (loss) per share:
        Basic                                $0.52        $(0.01)        $0.46
        Diluted                              $0.50        $(0.01)        $0.44

    Weighted average number of common
     shares outstanding:
        Basic                           13,736,169    13,505,952    13,360,986
        Diluted                         14,333,270    13,505,952    14,007,372