Weekly News...7/1/05 JULY 01, 2005 -- Nike FY Sales Top $13 Billion In FY05, Nike revenues increased 12% to $13.7 billion, compared to $12.3 billion in FY04. Changes in currency exchange rates contributed three percentage points of this growth, while the acquisition of Converse and Starter added one point. Full year net income was up 28% to $1.2 billion, or $4.48 per diluted share, versus $945.6 million, or $3.51 per diluted share, in FY04. 4Q revenues increased 7% to $3.7 billion, versus $3.5 billion for the same period last year. Three percentage points of this growth were the result of changes in currency exchange rates. 4Q net income was up 15% to $349.5 million, or $1.30 per diluted share, compared to $305.0 million, or $1.13 per diluted share in the prior year. Commenting on the company's results, William Perez, president/CEO, said, "Fiscal 2005 was a great year. The strength of the Nike brand around the world, the breadth of our Nike, Inc. portfolio, and the quality of our management team contributed to another year of consistent, profitable growth for our shareholders. The Nike brand is exceptionally strong, driving full-year revenue gains across all regions and product lines, while Converse and Cole Haan led the growth in our portfolio of other businesses. Today's record earnings were driven by healthy revenue growth and the highest gross margin in the company's history. "Looking ahead, our worldwide futures orders for athletic footwear and apparel are strong, up 9.5%, with all regions posting increases and U.S. footwear remaining particularly healthy. We're very pleased with the brand strength reflected in these futures results and we see continued potential for profitable expansion across our portfolio of businesses." The company reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from June through November 2005, totaling $6.3 billion, 9.5% higher than such orders reported for the same period last year. Approximately one point of this growth was due to changes in currency exchange rates. By region, US futures were up 9%; Europe increased 7%; Asia Pacific grew 11%; and the Americas increased 25%. Changes in currency exchange rates had a favorable impact of two percentage points in Europe and Asia Pacific. Changes in currency exchange rates had no impact on futures orders growth for the Americas. During 4Q, US revenues increased 3% to $1.3 billion. US athletic footwear revenues increased 7% to $907.2 million. Apparel revenues declined 7% to $335.9 million. Equipment revenues increased 17% to $84.3 million. Pre-tax income for the quarter rose 9% to $311.8 million. For the FY, US revenues were up 7% to $5.1 billion. Footwear revenues increased 9% to $3.4 billion; apparel revenues grew 2% to $1.5 billion; and equipment revenues grew 13% to $313.4 million. US pre-tax income improved 12% to $1.1 billion. 4Q revenues for the EMEA region grew 4% to $1.1 billion. Seven percentage points of this growth were the result of changes in currency exchange rates. Footwear revenues increased 9% to $689.6 million, apparel revenues declined 4% to $366.1 million and equipment revenues declined 2% to $73.0 million. Pre-tax income rose 10% to $254.2 million. For the full year, EMEA revenues grew 12% to $4.3 billion, compared to $3.8 billion last year. Seven percentage points of this growth were the result of changes in currency exchange rates. Footwear revenues were up 12% to $2.5 billion. Apparel revenues increased 12% to $1.5 billion and equipment revenues rose 9% to $284.5 million. Pre-tax income increased 23% for the full-year to $917.5 million. In the Asia Pacific Region, quarterly revenues grew 19% to $535.0 million. Three percentage points of this growth were the result of changes in currency exchange rates. Footwear revenues were up 16% to $269.8 million; apparel revenues increased 21% to $210.6 million and equipment revenues grew 32% to $54.6 million. 4Q pre-tax income was up 36% to $124.0 million. Full-year Asia Pacific revenues increased 18% to $1.9 billion. Four percentage points of this growth were the result of changes in currency exchange rates. Footwear revenues increased 13% to $962.9 million. Apparel revenues were up 23% to $755.5 million. Equipment revenues increased 25% to $178.9 million. Pre-tax income increased 13% to $399.8 million. Quarterly revenues in the Americas region increased 20% to $201.1 million. This growth rate reflected a six percentage-point increase due to changes in currency exchange rates. Footwear revenues were up 18% to $134.4 million, apparel revenues increased 20% to $53.2 million and equipment revenues increased 36% to $13.5 million. Pre-tax income was up 11% to $29.2 million. For the full year, Americas revenues increased 15% to $695.8 million, compared to $604.5 million last year. One percentage point of this growth was the result of changes in currency exchange rates. Footwear revenues increased 17% to $478.6 million, apparel revenues grew 6% to $169.1 million and equipment revenues increased 31% to $48.1 million. Pre-tax income rose 21% for the full year, to $117.6 million. In 4Q, Other revenues, which include results for Bauer Nike Hockey, Cole Haan, Converse, Exeter Brands Group, Hurley International and Nike Golf, grew 6% to $529.2 million. For the full year, other revenues increased 22% to $1.7 billion. Pre-tax income declined 2% in 4Q and increased 104% for the FY. In 4Q, gross margins were 45.2% of revenue compared to 43.8% last year. For the FY, gross margins were 44.5% compared to 42.9% last year. Selling and administrative expenses were 30.6% of 4Q revenues, compared to 29.8% last year. For the full year, selling and administrative expenses were 30.7% of full year revenues versus 30.2% last year. At fiscal year-end, global inventories stood at $1.8 billion, an increase of 10% from last year. Cash and short-term investments were $1.8 billion at fiscal year-end, compared to $1.2 billion last year. Sport Chalet Board Oks Stock Recapitalization Sport Chalet's board of directors has proposed a recapitalization plan designed to facilitate the orderly transition of control from founder Norbert Olberz, the principal stockholder, to the company's management and increase financial flexibility for the company and its stockholders. The recapitalization plan includes transferring a portion of Olberz's Sport Chalet ownership to Craig Levra, COB/CEO, and Howard Kaminsky, EVP/CFO. It allows current stockholders to retain existing ownership and voting interests. The proposed recapitalization plan would establish two classes of common stock and would be effected through a four-for-one reverse stock split of the outstanding common stock and the reclassification of each post-split share of common stock into a new share of Class B common stock. The company then would issue a non-taxable stock dividend of seven shares of Class A common stock for each one outstanding share of Class B common stock. Each share of Class B common stock would entitle the holder to one vote, and each share of Class A common stock would entitle the holder to 1/20 of one vote. To illustrate, a hypothetical Sport Chalet stockholder who currently owns 1,000 shares, after the recapitalization would own 250 Class B shares, each with one vote, and 1,750 Class A shares, each with 1/20th of one vote. Highlights of proposed recapitalization are: * It facilitates an orderly transition of control from Olberz, the principal stockholder, to the company's management and eliminates uncertainty regarding a management succession plan, future ownership or the business strategy of Sport Chalet. The recapitalization allows current management to maintain its focus on executing the growth strategy and maintain the corporate culture. * It increases the number of outstanding shares of common stock. The recapitalization will double the number of freely traded shares which may increase the liquidity of Sport Chalet's stock over time. This may cause the market price to more efficiently reflect the value of the shares, enhance the ability of institutional investors to acquire the shares and reduce the volatility in the market. * The planned transfer of to Levra and Kaminsky will more closely tie the current operating management to Sport Chalet and demonstrates their commitment to the company. It allows the company to potentially issue additional common stock in the future for corporate purposes. It will be able to use equity for future financings, acquisitions or employee compensation without diluting existing stockholder voting rights. Levra stated, "The proposed recapitalization plan represents a commitment by the Olberz family to the future of Sport Chalet and is a positive step for the company's stockholders. It is important to note that the recapitalization will not only maintain the ownership and voting interests of our current stockholders but will also increase the company's liquidity. We are very pleased that the new proposed ownership structure increases the certainty about Sport Chalet's future and enables us to maintain our focus on executing the company's proven operating strategy and driving long-term growth. "In the last several years Sport Chalet has reached new milestones, entering new markets outside Southern California and surpassing $300 million in annual sales. We have also invested in systems and infrastructure to position the company for future growth. We have continued to expand the company based on the fundamentals established by founder Norbert Olberz and look forward to continuing his vision. As demonstrated by the strong 2005 fiscal year performance we announced separately today, our dedication to Sport Chalet's unique culture and a strong focus on customer service is continuing to fuel our success. We remain committed to building on this momentum, further growing the Company and continuing to enhance stockholder value." Under the terms of the proposed recapitalization, Olberz plans to transfer approximately 973,000 shares of Class B common stock to Levra and Howard Kaminsky, which is intended to give them approximately 45% of the combined voting interests of Class B and Class A common stock when added to the shares of Sport Chalet stock they currently own. The proposed recapitalization plan would double the total number of shares outstanding from approximately 6,686,368 to 13,372,736. Therefore, the recapitalization is expected to have the same impact on earnings per share as a two-for-one stock split. However, the establishment of dual classes of common stock would not affect the relative voting or equity interests of existing stockholders since the reclassification of common stock and issuance of a stock dividend will affect each stockholder in proportion to the number of shares currently owned. The recapitalization plan also includes certain protection features for holders of Class A shares in an effort to ensure parity in the trading of the two classes of common stock. Additionally, transferred Class B shares from the founder to management will be treated as a contribution to the company's capital with the offsetting charge as compensation expense. As a result, the company expects to record a one-time charge in 2Q06 which will be based on the stock price at the time of the transfer. It estimates the charge would be approximately $1.08 per diluted share based on today's stock price, or approximately 54¢ per diluted share calculated on a post transaction basis. Nasdaq has advised the company that the recapitalization plan complies with its rules regarding classes of stock with different voting rights. The recapitalization plan is one of the proposals to be considered and voted upon at the next annual meeting following a review of proxy materials by the SEC. The annual meeting of stockholders is scheduled for September 20, 2005. YTD Sporting Goods Sales Up 6.7% The Monthly Retail Trade Survey, prepared by the US Census Bureau, reported sales in sporting goods stores of $2.61 billion (preliminary) for the most recent reporting month (April), up 13.3% from the $2.3 billion in April 2004. The increase follows a 5.0% increase in March. YTD sales are $9.15 billion, up 6.7% from the same period last year. Total sales for calendar year 2004 were $29.74 billion, up 8.6% versus 2003. Sporting goods store sales for all of 2003 were $27.38 billion, a 3.8% increase versus 2002. Among the 28 retail categories in the Survey, sporting goods stores' growth for 2004 ranked in the top third and exceeded the 7.6% growth rate for all retail sales. The overall retail growth represented the strongest increase since 1999’s 8.4% gain. The estimated annual sales for sporting goods stores in the US Census Bureau Monthly Retail Trade is consistent with sporting goods sales reported in the NSGA study "The Sporting Goods Market," a fact that pleases NSGA. The US Census Bureau estimates are based on data from the Monthly Retail Trade Survey, Annual Retail Trade Survey, and administrative records and have been adjusted using results of the most recent economic census. For a full comparative chart of sales in sporting goods stores, visit the members-only "Research & Statistics" area of the NSGA website: www.nsga.org.