Gart Sports sees a near-term hit to earnings from its pending merger with The Sports Authority, but the deal may help smooth out the moguls it encountered in its fiscal 2002 fourth quarter sales.

Lack of snowy weather in the Rockies — and the inability to anniversary last year’s Olympic windfall — led to a 3.2% decline in comparable store sales for the quarter while the year’s comps remained flat to fiscal 2001.
There is no doubt that both retailers would have benefited from Gart’s winter sports expertise and TSA’s snowbound Northeast retail locations.

First quarter comps are expected to be “slightly negative” against last year due to the Olympics issue. Comps in Q1.2002 were up 6.0%. The company is counting on the later Easter and easy Q2 comps in Colorado to move sales up in H1.

On the plus side, Q4 margins improved 60 basis points on fewer promotions, especially in the footwear category, where comps were down in the high singles.

Total sales for the year ended February 1, 2003 increased 12.3% to $1.05 billion. Net income for the year increased 45.9% to $23.2 million, or $1.86 per fully diluted share, compared with $15.9 million, or $1.54 per fully diluted share, in the prior year — excluding the $7.6 million effect of integration costs associated with the acquisition of Oshman’s.

Inventory was down 2% on a per square foot basis. The company closed seven stores in 2002 and plans to open 15 new stores in 2003.

First Call average estimates call for $2.13 a share for 2003, but GRTS CEO Doug Morton felt more comfortable with $2 per share, based on the impact of the TSA merger. Gart executives said they were comfortable with Q1.2003 EPS estimates of 26 cents a share.

On February 20, 2003, Gart Sports announced it had approved a definitive agreement with The Sports Authority, Inc. providing for a merger of equals. GRTS expects $20 million in savings from merger synergies in fiscal 2004, $40 million from synergies in the fiscal year 2005 and $50 million in fiscal 2006.


KEY METRICS:

    FOURTH QUARTER

  • Net income improved 16.3% to $12.8 million
  • Diluted EPS was $1.03 vs. 95 cents in Q4.2001
  • Total sales increased 0.3% to $316.8 million
  • Same-store sales down 3.2%


>>> Soft comps are not a great way to kick off the New Year, especially with the merger with TSA still pending. The personnel issues will be disrupting enough