Golfsmith posted a mid-singles increase in net sales for the first quarter, thanks to the addition of 13 stores that are not included in the comp base. Comparable store sales actually declined 9.3% for the quarter. According to the company, “comparable store sales for the quarter continued to be impacted by increased competition in certain major geographic markets and declining sales in the club-making business.” The combinations of factors ultimately caused the retailer to lower sales and earnings guidance for fiscal 2007.
On a conference call with analysts, president and CEO, Jim Thompson commented “In Atlanta alone, where a new competitor [PGA Superstores] has introduced a large store format, golf retail square footage has increased 113% over the past two years.” In addition to the decreases in the clubmaking business and increases in competition, the retailer saw a decrease in rounds played during the first quarter affect sales, as well as “new drivers not yet selling as expected.”
Thompson continued, “The reality is there's two significant products that the consumer has shown a real interest in, one that has been recalled, and one that we've had allocation issues on. And the two combined, put pressure on our top line.” The recall involved the Nike square-headed driver (SEW_0713), which is back in the pipeline, while the other issue involves lack of inventory of Callaways FT-i driver, which is not expected to be fully overcome until June (SEW_0719).
Looking ahead, the company anticipates Q2 net revenues to range between $123 million to $126 million, with comparable store sales down between 4.5% and 6.5%. Diluted earnings per share are expected to be between 36 cents and 41 cents.
For the full year of fiscal 2007, the company decreased its guidance for both sales and earnings. Net revenue expectations were lowered from a range of $417 million to $430 million to a range of $389 million to $400 million with comparable store sales flat to down 3%, down from earlier guidance of an increase of 1.5% to 3.0%. Diluted earnings per share are now expected to be between 30 cents and 45 cents, down from previous guidance of 69 cents to 79 cents. The company expects to open 12 to 14 stores, with 11 open by Fathers Day.
| Golfsmith International | |||
| First Quarter Results | |||
| (in $ millions) | 2007 | 2006 | Change |
| Total Sales | $77.7 | $74.8 | +3.8% |
| Stores | $57.6 | $53.1 | +8.4% |
| Consumer Direct | $18.3 | $20.2 | -9.3% |
| International | $1.7 | $1.5 | +18.6% |
| GP % | 34.5% | 34.5% | flat |
| SG&A % | 37.8% | 31.7% | +610 bps |
| Net Income | ($4.9) | ($0.9) | -465% |
| Diluted EPS | (31¢) | (9¢) | -244% |
| Inventories* | $100.1 | $81.5 | +22.8% |
| Comp Sales | -5.7% | 12.3% | |
| *at quarter-end | |||
