Outdoor financials: New stores bolster Sport Chalet's bottom line, plus Big 5, Outdoor Channel, GSI

New stores bolster Sport Chalet's bottom line, Outdoor Channel ad revenue flat for Q3, Big 5 posts Q3 net income decrease, GSI accounting issues delay quarterly filing
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New stores bolster Sport Chalet's bottom line
On the eve of opening three new stores in Arizona, Sport Chalet (Nasdaq: SPCHA and SPCHB) reported a 12.7 percent sales increase for the 2006 second quarter. Same-store sales increased 2.7 percent for the quarter.

Sales for the quarter were $81.7 million, up from $72.5 million last year, with sales from five new stores contributing $6.9 million, or 10.7 percent of the increase. Two new stores were opened in the second quarter of fiscal 2005 and three new stores were opened in the third quarter of fiscal 2005.

Gross profit increased as a percent of sales from 30.7 percent last year to 31.8 percent for the same period this year. The company said the increase was primarily due to better inventory assortments as well as an improvement in inventory shrinkage.

Selling, general and administrative expenses as a percent of sales increased to 36.9 percent for the second quarter of fiscal 2006. The increase is related to the recapitalization approved by the company's stockholders which included the transfer of stock from the company's founder to certain members of management and which resulted in a charge of approximately $8.6 million.

Sport Chalet said that excluding the effect of the recapitalization, SG&A as a percent of sales decreased to 26.4 percent compared to 27 percent last year. It added that the improvement reflects new store opening expenses not incurred this year as compared to additional labor and advertising expenses associated with new store openings in 2004.

Net loss for the second quarter was $5.2 million, or $0.38 per diluted share, which includes an after-tax charge of $7.8 million, or $0.55 per diluted share, related to the recapitalization. Excluding the effect of the recapitalization, net income increased 63.7 percent from $1.6 million, or $0.11 per diluted share, last year to $2.6 million, or $0.19 per diluted share, this year.

The recapitalization completed during the second quarter of fiscal 2005 doubled the company's total number of shares outstanding, having the same effect as a 2-for-1 stock split.

Sport Chalet will expand into its third state with the opening of three stores in Arizona. In addition, one additional Southern California store is expected to open in fiscal 2006. The company also anticipates additional store expansion to continue, with four to eight stores planned for fiscal 2007.

Outdoor Channel ad revenue flat for Q3
Outdoor Channel Holdings (Nasdaq: OUTD) reported a 4.2 percent increase in third-quarter revenue to $11.4 million from $10.9 million last year. The company said advertising revenue generated from The Outdoor Channel was relatively flat at $5.7 million. Subscriber fees rose 11.5 percent to $3.8 million from $3.5 million in the 2004 third quarter, due to an increased number of paying subscribers. Membership income totaled $1.9 million, compared with $1.8 million in the same period a year earlier.

Net income for the 2005 third quarter totaled $323,000, or $0.01 per diluted share, based on 27.7 million weighted average shares outstanding. In the 2004 third quarter, the company sustained a net loss of $27.7 million, or $1.75 per share, based on 15.8 million weighted average shares.

Total expenses for the third quarter declined to $11.1 million from $56.7 million in 2004, which included a non-cash, non-recurring expense of $48.0 million to buy a minority interest of The Outdoor Channel. Excluding that expense, total expenses for the current quarter increased 28.3 percent over the 2004 third quarter.

Big 5 posts Q3 net income decrease
Big 5 Sporting Goods (Nasdaq: BGFV) misses analyst estimates as third-quarter profit fell 15 percent, weighed by legal costs and restatement expenses.

Its net income was $7.2 million, or $0.32 per share, down from income of $8.5 million, or $0.37 per share, last year. The company said third-quarter results included charges totaling $0.09 per share, associated with legal fees, prior restatements and its transition to a new distribution center, and gains of $0.09 per share. Excluding items, the company said it would have earned $0.32 per share in the quarter, still well below analysts' consensus estimate of $0.37 per share.

Net sales increased by $8.8 million, or 4.5 percent, to $206.8 million from net sales, as previously restated, of $198.0 million in the third quarter of 2004.

Big 5's same-store sales increased 3.8 percent during the third quarter versus the same 13-week calendar period last year, marking its 39th consecutive quarterly increase in same-store sales over comparable prior periods. On a fiscal quarter basis, same store sales increased 1.2 percent during the third quarter versus the third quarter of fiscal 2004. The difference in same-store sales comparisons was due to fiscal 2005 being a 52-week year and fiscal 2004 being a 53-week year and the resulting calendar shift of pre-Fourth of July holiday business out of the fiscal 2005 third quarter.

The company also said it has been receiving product at its new distribution center in Riverside, Calif., for two months and in early October 2005, it began shipping product from the new distribution center and moving product from its existing distribution center to the new facility. It expects to complete the transition to its new distribution center during the first quarter of fiscal 2006.

The retailer opened four new stores and closed one store during the third quarter. It expects to open a total of 15 net new stores during fiscal 2005, bringing its expected total year-end store count to 324 stores.

Lastly, its board again declared a quarterly cash dividend of $0.07 per share of outstanding common stock, which will be paid on Dec. 15, 2005, to stockholders of record as of Dec. 1, 2005. It initiated a quarterly cash dividend, at an annual rate of $0.28 per share, in the fourth quarter of fiscal 2004.

GSI accounting issues delay quarterly filing
GSI Commerce (Nasdaq: GSIC) will delay filing its report for the third quarter with the Securities and Exchange Commission so it can resolve the two accounting issues that led to it postponing the release of its third-quarter results Oct. 26. The company told the SEC it plans to file by Nov. 15.

The first accounting issue is an independent investigation of $283,000 in credits that GSI recorded in the fourth quarter of last year. The second is the failure of a systemic control GSI used to validate a component of its general ledger balance for accounts payable and the resulting change to a manual calculation to validate that balance.

GSI said it has concluded its investigation of the credits and completed the manual calculation to validate the general ledger balance for accounts payable. It expects the adjustments resulting from the resolution of these issues to be within the range it announced Oct. 26. That range is from a charge of $300,000 to a gain of $1.2 million.

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