The Sports Authority is still finding it difficult to mesh the various retail brands under the umbrella created more than 18 months ago when the old TSA was acquired by Gart Sports, joining that retail brand along with its Oshman’s and Sportmart nameplates. The combined entity found itself spending more resources and energy on trying to fix the old TSA than creating a true national brand under The Sports Authority as planned. After a year and a half of consolidation work, the company is just starting to re-brand stores in a number of major markets, with work expected to be completed on 58 stores “in the next few weeks”.

Recently appointed president of merchandising Dave Campisi, who came to TSA from Kohl’s where he ran the women's apparel, accessories, intimate, and cosmetics business, said his top priorities include “changing the culture” within TSA and “begin driving sales first and foremost”. Part of that strategy will include moving to a new FIFO clearance cadence to help clear heavy inventories in the first quarter and beyond. He said new supply chain processes, assortment planning software, and quick replenishment programs will help them reduce inventories by roughly $50 million this year, or a 7% to 8% reduction on a per store basis.

The Sports Authority reported that net income for the fourth quarter ended January 29 was $25.6 million, or 97 cents per diluted share, compared with net income of $28.3 million, or $1.08 per diluted share, in the prior year's fourth quarter, when excluding the effect of after-tax merger integration costs of $13.7 million, or 52 cents per diluted share. Including merger integration costs, net income for Q4 last year was $14.6 million, or 55 cents per diluted share. Both the full year and quarter results are subject to adjustments based on new guidelines laid out by the SEC.

Gross margins were down 40 basis points to 22.1% of sales in the quarter, with merchandise margins posting a flat quarter.

Total sales for Q4 were $713.8 million, compared with $712.0 million in the prior year's fourth quarter. Comp store sales for the period decreased 2.2% versus a 0.2% comp sales gain in the year-ago period.

Campisi said TSA will focus on golf, fitness, active apparel, team sports, and winter sports, which along with athletic footwear, account for roughly 85% of sales.

Footwear reportedly made up 22% of the total business at year-end, while apparel represents 26% of the total and hardlines makes up the 52% balance.

Campisi said they plan to “aggressively expand” the women’s activewear business with Nike, Under Armour, and Nike. TSA has completed footwear statement walls in 211 stores, a process that now enables them to get better product from Nike. The hybrid stores feature self-service for footwear under $75, while product over $75 will be featured on the shoe wall.

TSA had 65 Golf Day shops in operation at year-end and will add or remodel another 65 shops this year. In fitness, he said they are adding more higher-end product, with product up to $3,500 on the floor.

The lack of winter weather in some key markets clearly impacted sales of winter goods for the quarter. The new TSA, with their strong background in snow sports at Gart, had made a considerable effort in ramping up the snow sports category in the old TSA stores in the Northeast and Upper Midwest, an effort that was stymied by the lack of snow. Still, those stores showed double-digit increases in the category in the quarter.

Chairman and CEO Doug Morton did say that TSA is experienced “improving sales performance” in all winter sports categories after post-Christmas weather turned more seasonal.

Management said that they will pull back a bit in the snow sports category for this year, with Campisi indicating that they will focus on the top six vendors and more focused assortments in both snowboard and alpine ski this fall.

The camping and hunting merchandise, as well as the holiday-driven categories like table games and scooters, were said to be “below plan”. TSA is in the process of exiting the guns category completely. They will continue to carry accessories and some ammunition under the hunting category, but over the next 30 days firearms will be eliminated from the remaining 52 stores that still have inventory.

Campisi said their goal for private label was to get it to 11% of sales, a number he said they hit at the end of the quarter. He said they also saw a “significant improvement” in private label margins.

The Sports Authority opened six stores and closed four stores during the fourth quarter for a total number of 392 stores in 45 states at year-end. As for remodels of the old TSA stores, Morton said they had completed, or had in process, 47 remodels at the end of the year.

The remodeled stores are getting an incremental 5% sales lift versus pre-remodel numbers. The sales lift, which was a couple of points off the initial lift the remodels were getting, were also impacted by the winter sports shortfall.

TSA’s guidance for 2005 fell far short of Wall Street’s expectations, initially pushing shares lower before recovering for a flat week to close at $26.00 on Friday.

For fiscal year 2005, TSA is forecasting EPS of $1.90 to $1.95 per diluted share on a 2% comps store sales gain, excluding the impact of lease accounting adjustments. For Q1, the company sees EPS in the 25 cents to 27 cents per diluted share range on a comp store sales gain in the 1% to 2% range, again excluding any lease accounting adjustments.