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 Breaking Headlines

Today's news...8/31/05

AUGUST 31, 2005 -- Forzani Net Falls As It Retrofits Sport Chek

Retail system sales for the quarter were C$305.1 million, an increase of C$48.7 million, or 19.0%. The increase was partly due to the addition of the Nevada Bob's franchise retail sales and the National Sports corporate retail volume, a result of their acquisition by Forzani. Without these volumes, the existing retail business generated system retail sales of C$270.1 million, a 5.3% increase over last year. But it recorded a net loss of C$2.3 million for the second quarter, compared to a profit of C$2.0 million in the prior year. In 2Q, the company was busy doing a major retrofit of its corporate Sport Chek banner. This involved liquidating merchandise that have reduced presence going forward. The company managed to complete the conversion of 120 big box stores in six months, however,

Revenue, consisting of corporate-store sales, wholesale sales, service income, equipment rentals, franchise fees and franchise royalties, was $243.6 million, up $27.2 million, or 12.6%. Again, this was partly driven by the Nevada Bob's and National Sports revenues. Excluding these two, the revenues were $221.3 million, a 2.3% increase. Comp-store sales in corporate stores were up 0.2%, while franchise comp-store sales increased 4.6%. The corporate store performance was driven by a decline of 4.3% in the Sport Mart banner, which gets a new look next spring. The Sport Chek/Coast Mountain Sports stores generated positive comp-store sales of 1.3% for the quarter. The consolidated corporate-store increase was the first quarterly comp-store sales increase in 10 quarters.


Finish Line Comps Fall; Revises 2Q, 2H Guidance Down

The Finish Line reported 2Q net sales of $341.6 million, an increase of 9%. Comp-store net sales for 2Q decreased 2% compared to an increase of 6% in 2Q last year.
The company is lowering Q2 earnings guidance due to the decrease in sales, product margin pressure resulting from a more promotional environment, as well as negative leverage on occupancy costs and SG&A. The latter was negatively affected by a reserve of $1.5 million after taxes, related to legal matters regarding alleged civil violations of California wage and hour laws.

Alan Cohen, COB/CEO, stated: "Although we started the quarter with sales on plan for most of June, sales from late June thru the remainder of 2Q were disappointing. Footwear comp-store sales were flat for the quarter while softgoods comped down 8%. For the Back-to-School season, the promotional environment in the mall has been increasing weekly, and we have reacted with increased price promotions in our stores to remain competitive. In spite of lower than expected sales, we have worked diligently to keep our inventories in line and expect to report an increase of 1%-3% per square foot at the end of 2Q."

The company's new guidance for 2Q EPS is 37¢-39¢ compared to previous guidance of 48¢-50¢ per diluted share. The company earned 42¢ last year, 3Q, sales are expected to be approximately $262 million based on a flat comp sales plan and a LPS of 1¢-3¢, compared to previous guidance of income in the range of 5¢-7. Q4 sales are expected to be approximately $401 million based on a flat comp with EPS of 56-¢58¢, compared to previous guidance of 64¢-66¢. For the full fiscal year, sales are expected to approximate $1.3 billion with EPS of $1.16 to $1.21. Last year the company reported full year diluted earnings per share of $1.24.

The stock plunged $2.13, or 13.2% on volume of 7,645,800 shares the day of the news. It only recovered a few cents today. The Finish Line was upgraded to equal-weight from underweight at Morgan Stanley. The broker said the move was entirely due to valuation. "Although the factors underpinning our bearish views on FINL are still in place (lack of portfolio breadth, unproven growth initiatives, higher costs of new openings), we do not see good risk/reward for maintaining our underweight," the brokerage said. Susquehanna Financial, however, reduced its rating to neutral from positive.


Growing Interest Forces NSGA To Move '06 Management Conference

The National Sporting Goods Association is returning to a familiar location with new dates for its 42nd Annual Management Conference & 8th Annual Team Dealer Summit. Next year's event will return to The Westin LaCantera Resort in San Antonio, the site of the '00 Conference/Summit, the industry's leading networking/education event. The new dates will be May 21-24, 2006. For many years, NSGA has hosted the event the week prior to Memorial Day, and this date change returns the Conference to its traditional timeframe.

"As many of our members know, the Conference & Summit dates were originally May 7-10 at Hilton Head Island, SC.,” said NSGA president/CEO Jim Faltinek. "In '06, NSGA is planning a special dinner to celebrate the 50th anniversary of the Sporting Goods Industry Hall of Fame, and the anticipated increase in attendance for that event and the Conference/Summit prompted us to re-evaluate our space needs.

"When it became clear that NSGA would not have access to the necessary meeting room space or the number of sleeping rooms that we would need at the hotel in Hilton Head, a change was made. We were at this beautiful hotel in 2000, and those who attended loved the resort and golf course. We're looking forward to returning to the Hill Country of San Antonio again in '06."


SGMA Initiates New Communication Strategy

SGMA president/CEO Tom Cove announced a new member communications plan focused on important public policy issues, as well as market intelligence and business programs. As a primary communication vehicle to member companies, SGMA will soon launch an electronic executive brief designed to highlight the in-depth content on SGMA's website (www.sgma.com). Cove's new plan emphasizes flexibility, timeliness, and urgency, including issue alerts, legislative updates, and a new grassroots lobbying program to promote member action on critical policy changes.

Cove's goal is to differentiate SGMA's unique value and expertise to member companies. "We want to reach out to members in our areas of expertise, such as legislative policy, market research, international affairs, and industry relations," said Cove. "Our members need timely reporting on the issues we deal with daily, from China quotas to product liability to national sports governing body rulings. An SGMA executive brief will deliver relevant news and information, and encourage our members to engage with us."

One result of SGMA's new communications plan is the recent spin-off of the association's monthly pub, Sports Edge, to the magazine's publisher.

Cove anticipates this positive move will better enable SGMA to focus on issues-oriented communications while still fulfilling an industry need for general news and information. "The industry is already well covered by a few leading publications," noted Cove. "Through our new programs, SGMA's communications will be more targeted and meaningful to our members."


ADT Offering Sensormatic Discounts To NSGA Members

ADT Security Services has strengthened its relationship with the National Sporting Goods Association by becoming an official vendor partner. Effective August 1, ADT, which is a sponsor for the NSGA Management Conference & Team Dealer Summit, became the Official Provider of Electronic Article Surveillance (EAS) equipment for NSGA members.

The discount program for NSGA members covers Sensormatic EAS systems, which are designed to help retailers increase their sales and profits by reducing shoplifting and increasing open merchandising opportunities. Sensormatic systems are engineered and manufactured for detection and deactivation performance, durability, ease-of-use and aesthetics.

The new program provides a 15% discount off the list price to NSGA members who purchase Sensormatic EAS products from ADT. Specific details of the offer will be sent to members in a special mailing.

"Source tagging programs help reduce theft, lower labor cost, and increase sales and profits for retailers and manufacturers alike," said Tom Racette, director of source tagging programs for ADT. "These results have been helping retailers across a wide range of markets for many years and we are confident that the sporting goods industry will realize the same success."

For more information on NSGA's ADT discount program, members may call Rhonda Onuszko at NSGA, (800) 815-5422, ext. 131, or Terry Petrucci at ADT, (248) 761-4955.


K2 Sports has entered into a multi-year agreement with World Wide Cycle Supply to license K2 Bikes. Effective immediately, World Wide Cycle will design, manufacture, market and distribute K2 Bikes. K2 Sports will discontinue its bicycle operations and transfer the existing business and inventory to World Wide Cycle.


Nike Golf is drafting off the phenomenal success of Nike Shox technology in its running category by incorporating the same Shox technology in golf footwear. The introduction of the Nike Shox Golf footwear will bring offer the same cushioning and responsive technology that has been giving runners a superior ride. The Nike Shox Golf will be available in stores on October 1 with a suggested retail of $130.00. In addition to a two-year limited waterproof warranty, the Nike Shox Golf comes with a 45-day limited comfort warranty.


Gold's Gym International has named Precor as its vendor of the year for '04-'05, and Precor sales manager Jeff Hoke as the outstanding support individual.


On August 30, Timberland CEO Jeffrey Swartz exercised options on 9,600 shares priced at $17.74. The three sales netted him $145,416.


Wachovia Securities upgraded Quiksilver and Pacific Sunwear of California, both to outperform. The broker said the surf and skate community is putting out "some of the freshest product in the industry" and both companies don't have as much as denim exposure relative to other fashion sectors. Valuations also are reasonable, the broker said.


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Categories
Sporting goods industry
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Forzani
The Finish Line Inc.
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Finish Line
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promotional environment

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Alan Cohen
Tom Cove
Tom Racette
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 Breaking Headlines
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DECEMBER 01, 2005

Finish Line Had 16% Revenue Gain In 3Q; Comps Up 4%
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Timberland Expands Anti-Counterfeiting Measures
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NOVEMBER 29, 2005


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