Sport Chalet Reports Increased Net Income and Comparable Store Sales Growth for Second Quarter of Fiscal 2013

Best Second Quarter Results in Five Years


LOS ANGELES, Nov. 7, 2012 (GLOBE NEWSWIRE) -- Sport Chalet, Inc. (Nasdaq:SPCHA) (Nasdaq:SPCHB), a leading operator of full-service, specialty sporting goods stores, today announced its financial results for the second quarter and six months ended September 30, 2012.

Second Quarter Summary

  • Net income was $0.8 million compared to net income of $0.6 million in the second quarter of the prior year;
     
  • Comparable store sales increased 5.5% for the 13 weeks ended September 30, 2012 compared to the same period last year;
     
  • Team Sales division sales increased 23.7% from the second quarter of last year; and
     
  • Online sales increased 15.6% from the second quarter of last year.

Second Quarter Results

Sales increased $3.5 million, or 3.9%, to $91.5 million for the 13 weeks ended September 30, 2012 from $88.0 million for the 13 weeks ended October 2, 2011. The sales increase is primarily due to a 5.5% increase in comparable store sales, an improvement on top of the 3.1% increase in the same period last year. Team Sales division and Online sales increased 23.7% and 15.6%, respectively. These sales increases were partially offset by one store closure which contributed $1.5 million in sales in the prior year. 

Gross profit decreased $0.5 million, or 1.9%, and as a percent of sales decreased to 27.6% from 29.2%. The 1.6% decrease as a percent of sales is primarily due to 0.8% from a promotional campaign in August, 0.3% in costs related to ongoing customer satisfaction initiatives implemented in August 2011, and changes in merchandise costs and in the product mix. 

Selling, general and administrative ("SG&A") expenses decreased $0.4 million, or 1.9%, primarily due to $0.4 million in savings from labor-related expenses, such as self-insurance for employee health insurance coverage and stock option expense. As a percent of sales, SG&A decreased to 24.0% from 25.4%. Depreciation decreased $0.3 million as a result of the low level of capital expenditures in recent fiscal years with no new store openings or significant remodels.

Net income for the quarter ended September 30, 2012 increased $0.2 million to $0.8 million, or $0.05 per diluted share, compared to net income of $0.6 million, or $0.04 per diluted share, for the quarter ended October 2, 2011. 

Craig Levra, Chairman and CEO, stated, "We are pleased with our second quarter results as we continued to grow top line sales and increased profitability with sequential and year-over-year improvements in both. The momentum we experienced during the first quarter continued in the second quarter, and we believe that we are well positioned to have a profitable fiscal 2013. Our recent results reflect the steps we have taken over the past few years to strengthen our financial position and adjust our operations. We are optimistic as we head into our most important holiday season with more technical merchandise available compared to last year from the most innovative brands from across the globe and our focus on expanding our Experts' knowledge in our technical offerings has never been greater."

Six-Month Results

For the six months ended September 30, 2012, total sales increased 2.6% to $175.3 million from $170.8 million for the first half of the prior fiscal year. The sales increase is primarily due to a comparable store sales increase of 4.1%, an improvement on top of the 2.7% increase in the same period last year, Team Sales division and Online sales increased 18.8% and 11.1%, respectively, partially offset by one store closure which contributed $3.2 million in sales in the prior year. 

Gross profit as a percent of sales decreased to 27.7% from 29.0% for the first six months of last year. The 1.3% decrease as a percent of sales is primarily due to 0.5% from a promotional campaign in August, 0.3% in costs related to ongoing customer satisfaction initiatives implemented in August 2011, and changes in merchandise costs and in the product mix.

SG&A expenses decreased $1.3 million, or 2.9%, primarily due to $1.4 million in savings from labor-related expenses, such as self-insurance for employee health insurance coverage, incentive payments largely for store employees and stock option expense. SG&A expenses as a percent of sales decreased to 24.3% from 25.7%.   Depreciation decreased $0.8 million as a result of the low level of capital expenditures in recent fiscal years with no new store openings or significant remodels.

The Company's net income for the six months ended September 30, 2012 improved by $1.1 million to $0.9 million, or $0.06 per diluted share, from a net loss of $0.2 million, or $0.02 per diluted share, for the same period last year.

Conference Call Info

The Company will be hosting a conference call and audio webcast, both open to the public, today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to review its financial results for the second quarter and six months ended September 30, 2012.  Investors will have the opportunity to listen to the earnings conference call over the internet through an audio webcast located at http://www.media-server.com/m/p/bs9rtc39. To listen to the live call, please go to the website at least fifteen minutes early to register and download and install any necessary audio software. The conference call also may be accessed by dialing (800) 561-2813 and entering passcode 99230773. A dial-in replay of the call will be available approximately two hours after the conference call through Midnight Pacific Time on Thursday, December 6, 2012 by dialing (888) 286-8010 and entering passcode 19330352.

New Store Opening

As previously announced, the Company currently plans to open a store in May 2013 in Downtown Los Angeles. Sport Chalet will be an anchor tenant at Brookfield Office Properties' FIGat7th, the destination retail center at the intersection of Figueroa Street and 7th Street that has undergone a $40 million redevelopment. The store will occupy 27,300 square feet of space at the lower courtyard level, and will join City Target as the first new anchors at the redeveloped FIGat7th. This store will incorporate a new design template of enhanced displays, fixtures, and graphics to reinforce the Sport Chalet brand and its market positioning as a destination for premium brands, technical merchandise and the highest quality service offerings.

About Sport Chalet, Inc.

Sport Chalet, founded in 1959 by Norbert Olberz, is a leading, full service specialty retailer with 54 stores in Arizona, California, Nevada and Utah; Sport Chalet online at www.sportchalet.com; and a Team Sales division. The Company offers over 50 specialty services for the sports enthusiast, including climbing, backcountry skiing, ski mountaineering, avalanche education, and mountain trekking instruction, car rack installation, snowboard and ski rental and repair, Scuba training and certification, Scuba boat charters, team sales, gait analysis, baseball/softball glove steaming and lacing, racquet stringing, and bicycle tune-up and repair at its store locations.

The Sport Chalet, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=10020

Forward-Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the negative effect of the economic downturn on the Company's sales, limitations on borrowing under the Company's bank credit facility, the Company's ability to control operating expenses and costs, the competitive environment of the sporting goods industry in general and in the Company's specific market areas, inflation, the challenge of maintaining its competitive position, changes in costs of goods and services, and the weather and economic conditions in general and in specific market areas. These and other risks are more fully described in the Company's filings with the Securities and Exchange Commission.

Sport Chalet, Inc.
 
Consolidated Statements of Operations (Unaudited)
     
  13 weeks ended  26 weeks ended 
  September 30, 2012 October 2, 2011 September 30, 2012 October 2, 2011
  (in thousands, except per share amounts)
Net sales  $ 91,452 $ 87,980 $ 175,301 $ 170,804
Cost of goods sold, buying and occupancy costs 66,233 62,281 126,714 121,281
Gross profit  25,219 25,699 48,587 49,523
     
Selling, general and administrative expenses  21,924 22,340 42,662 43,955
Depreciation and amortization 2,041 2,329 4,110 4,897
Income from operations  1,254 1,030 1,815 671
     
Interest expense  492 431 950 896
Income (loss) before income taxes  762 599 865 (225)
     
Income tax provision 2 --  2 2
Net income (loss) $ 760 $ 599 $ 863 $ (227)
     
Earnings (loss) per share:    
Basic $ 0.05 $ 0.04 $ 0.06 $ (0.02)
Diluted $ 0.05 $ 0.04 $ 0.06 $ (0.02)
     
Weighted average number of common shares outstanding:    
Basic 14,190 14,190 14,190 14,190
Diluted 14,203 14,223 14,201 14,190
 
 
Sport Chalet, Inc.
 
Consolidated Balance Sheets
   
  September 30,
2012
April 1,
2012
  (Unaudited) 
Assets (in thousands, except share amounts)
Current assets:  
Cash and cash equivalents $ 3,663 $ 2,811
Accounts receivable, net 7,564 2,777
Merchandise inventories 105,879 98,181
Prepaid expenses and other current assets 1,898 1,603
Total current assets 119,004 105,372
   
Fixed assets, net 19,723 22,081
Total assets $ 138,727 $ 127,453
   
Liabilities and stockholders' equity  
Current liabilities:  
Accounts payable $ 35,676 $ 28,220
Loan payable to bank 44,894 41,255
Salaries and wages payable 3,353 2,980
Other accrued expenses 17,593 17,370
Total current liabilities 101,516 89,825
   
Deferred rent 17,919 19,340
Commitments and contingencies  
   
Stockholders' equity:  
Preferred stock, $.01 par value:  
Authorized shares – 2,000,000  
Issued and outstanding shares – none --  -- 
Class A Common Stock, $.01 par value:  
Authorized shares – 46,000,000  
Issued and outstanding shares – 12,414,490 at  
September 30, 2012 and 12,414,490 at April 1, 2012 124 124
Class B Common Stock, $.01 par value:  
Authorized shares – 2,000,000  
Issued and outstanding shares – 1,775,821 at  
September 30, 2012 and 1,775,821 at April 1, 2012 18 18
Additional paid-in capital 37,162 37,021
Accumulated deficit (18,012) (18,875)
Total stockholders' equity 19,292 18,288
Total liabilities and stockholders' equity $ 138,727 $ 127,453
 
 
Sport Chalet, Inc.
 
Consolidated Statements of Cash Flows (Unaudited)
   
  26 weeks ended 
  September 30, 2012 October 2, 2011
  (in thousands)
Operating activities  
Net income (loss) $ 863 $ (227)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization  4,110 4,897
Loss on disposal of property and equipment (16) -- 
Share-based compensation 141 564
Changes in operating assets and liabilities:  
Accounts receivable  (4,787) (3,122)
Merchandise inventories  (7,698) (2,303)
Prepaid expenses and other current assets  (295) (99)
Accounts payable  6,880 6,416
Salaries and wages payable  373 271
Other accrued expenses  (21) (1,856)
Deferred rent (1,421) (1,418)
Net cash (used in) provided by operating activities  (1,871) 3,123
   
Investing activities  
Purchase of fixed assets  (932) (1,389)
Proceeds from sale of assets 16 -- 
Net cash used in investing activities  (916) (1,389)
   
Financing activities  
Proceeds from bank borrowing 187,025 181,119
Repayment of bank borrowing (183,386) (180,899)
Net cash provided by financing activities 3,639 220
   
Increase in cash and cash equivalents  852 1,954
Cash and cash equivalents at beginning of period 2,811 51
Cash and cash equivalents at end of period $ 3,663 $ 2,005
   
Supplemental disclosure of cash flow information  
Cash paid during the period for:   
Interest  $ 950 $ 906
Income tax $ 2 $ 2
   
Supplemental disclosure of non-cash investing and financing activities  
Purchases of fixed assets on credit 732 -- 
Fixed assets acquired under capital leases $ 244 $ 722
CONTACT: Howard Kaminsky, Chief Financial Officer
         investorrelations@sportchalet.com
         (818) 949-5300 ext. 5728

Sport Chalet