Fitness financials: Cybex's Q4 sales fall 12 percent, reports FY net loss, plus Sport Chalet, Nike, GSI Commerce

Cybex's Q4 sales fell 12 percent and the company reported an FY net loss, plus Sport Chalet’s Q3 same-store sales were down 15.4 percent, Nike considered cutting its workforce by 4 percent, and GSI Commerce posted an FY net loss.
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Cybex's Q4 sales fall 12 percent, reports FY net loss

Cybex International (Nasdaq: CYBI) posted a 12 percent drop in fourth-quarter sales, citing cautious behavior by fitness clubs in making expansion investments, as well as clubs reducing their capital expenditures.

"It's certainly a dismal environment economically," said Chairman John Aglialoro, on a conference call with analysts Feb. 10. "Like our competitors, we’re pretty challenged."

Net sales for the fourth quarter were $39.3 million compared to $44.5 million for the same period last year, or down 12 percent. The company reported a net loss for the fourth quarter of $10.9 million, including an $11.3 million goodwill impairment charge, or $0.62 per diluted share, compared to net income of $3.0 million, or $0.17 per diluted share, last year.

Sales in the quarter of cardiovascular equipment was $20.4 million, down 18 percent, while strength equipment sales were $15.7 million, down 4 percent, COO Art Hicks reported. Sales were down more dramatically in North America (15 percent) than internationally (4 percent), he said. Gross margins were also down 4.6 points for the quarter.

For the full year, net sales rose slightly to $147.9 million compared to $146.5 million for 2007. It reported a net loss of $9.1 million, or $0.52 per diluted share, compared to net income of $9.8 million, or $0.55 per diluted share, for 2007.

Cybex said the 2008 results included a fourth-quarter non-cash, non-deductible goodwill impairment charge of $11.3 million, or $0.64 per diluted share, triggered by declines in its stock price in the period.

Without the charge, it said net income would have been $373,000, or $0.02 per diluted share, for the fourth quarter of 2008 and $2.2 million, or $0.12 per diluted share, for 2008. Its operating income would have been $1.5 million for the fourth quarter of 2008 and $5.7 million for 2008.

Looking forward, the company said it is not certain how long the slow economic conditions will persist, but it expects sales to rebound as the economy recovers.

"Expenses are being closely monitored as they were throughout 2008, and some initiatives are being delayed until we are more confident of the sales horizon," said Aglialoro in a statement. "Gross margin in the quarter continued to be negatively impacted by higher material costs compared to Q4 2007 although we have seen some decreases in commodity prices in Q1 2009."

B. Riley & Co. downgraded Cybex from "buy" to "neutral" the day after its earnings report was released.

Sport Chalet’s Q3 same-store sales down 15.4 percent

Sport Chalet (Nasdaq: SPCHA & SPCHB) saw its third-quarter sales dip negatively, impacted by California's weak housing trends, rising unemployment and state budget crisis, as well as unseasonably warm weather in the company's core markets.

For the quarter ended Dec. 28, sales decreased 10.3 percent to $104.6 million for the third quarter of fiscal 2009 from $116.6 million for the third quarter of fiscal 2008. Eight new stores not included in same-store sales contributed $4.7 million in sales for the quarter, while same-store sales decreased 15.4 percent.

For the quarter, Sport Chalet said it recorded a non-cash impairment charge of $10.7 million pre-tax, or $0.76 per diluted share, related to certain stores. A tax provision of $11.6 million was also in the quarter. The combined total of the non-cash impairment charge and valuation allowance was $22.3 million, or $1.58 per diluted share.

Excluding the non-cash impairment charge and valuation allowance, as well as a non-cash impairment charge of $2.1 million pre-tax, or $0.09 per diluted share, the company's net loss for the quarter was $10.1 million, or $0.71 per diluted share, compared to net income of $600,000, or $0.04 per diluted share, for the third quarter last year.

Including the non-cash impairment charge and valuation allowance, net loss for the third quarter of 2009 was $32.4 million, or $2.29 per diluted share, compared to a net loss of $700,000, or $0.05 per diluted share, for the third quarter last year.

Gross profit as a percent of sales was 22.3 percent compared to 30.2 percent for the third quarter of last year. Sport Chalet said the drop was a result of increased promotional activity, increased rent as a percent of sales in newer stores and increased use of its Action Pass as consumers accumulate points that allow for certain reward certificates to be used toward their purchases.

Selling, general and administrative expenses as a percent of sales increased to 27.8 percent from 26.2 percent in the same period last year.

"Given that we expect fiscal 2009 will continue to be extremely challenging, we will maintain our prudent approach toward managing all areas of the organization. As such, we have appropriately reduced our capital expenditures for the year including our store opening program and other discretionary costs," said Craig Levra, Sport Chalet's chairman and CEO, in a statement.

As previously announced, Sport Chalet has retained Wedbush Morgan to evaluate strategic alternatives for the company. It noted that the review process may include, among others, such alternatives as raising additional capital, amending or replacing the company's current bank credit facility, further reducing expenses, or continuing to execute the company's current operating plan. No timetable has been set for completion of the review.



Nike considers cutting workforce by 4 percent


As phase two of a strategic restructuring plan started two years ago, Nike (NYSE: NKE) said it may cut up to 4 percent of its workforce -- about 1,400 jobs out of its nearly 35,000 worldwide.

Presently, Nike said it is unsure of the exact number, timing and location of the positions to be eliminated until a review of its entire business is complete at the end of May.

Nike added that it would look at its entire supply chain from the source to retail stores to ensure it is positioned as well as possible to survive in the increasingly difficult economic environment.

The company reorganized its business two years ago to increase sales and says this decision is the next step in that strategy to realign its business.

"In light of the current economic climate, it is more essential than ever to sharpen our focus on the consumer to maximize opportunities for product innovation and brand management in the marketplace," said Mark Parker, president and CEO of Nike, in a statement. "The decision to reduce our workforce is a difficult one, but it will put our business in the strongest position possible to continue to deliver long-term profitability and growth."

In recent quarters, the company has begun to show the pressures of the recession as its sales slowed, particularly in the United States, where consumers have cut spending. Nike's strong growth overseas continued, but its profits have been hampered by the dollar's strength.

Previously, the company took other steps to control costs, such as implementing a hiring freeze and cutting travel and other operating expenses. It also tightened its inventory controls.

GSI Commerce posts FY net loss

GSI Commerce (Nasdaq: GSIC), a provider of services that enable e-commerce, multi-channel retailing and interactive marketing for businesses, reported a fourth-quarter increase revenue -- $391.3 million versus $335.1 million in the same period last year.

For the quarter ended Jan. 3, the company's net profit was $24.4 million, or $0.45 per diluted share, compared to $16.5 million, or $0.03 per diluted share, last year.

For the full year, net revenues increased 29 percent to $966.9 million from $750.0 million. Non-GAAP net revenues increased 49 percent to $491.4 million from $328.8 million.

Loss from operations was $9.0 million compared to income from operations of $4.9 million. Non-GAAP income from operations was $81.9 million compared to $52.3 million.

The year's net loss was $16.9 million, or $0.36 per share, compared to net income of $3.0 million, or $0.06 per share, in 2008.

In its guidance for the 2009 first quarter, the company said it expects net revenues in a range of $187.0 million to $192.0 million. Loss from operations is expected to be in a range of $20.0 million to $21.0 million. Non-GAAP income from operations is expected to be in a range of $2.0 million to $3.0 million.

--Compiled by Wendy Geister

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