Golfsmith International Holdings (GOLF)

Third Quarter Highlights:

·                  Net revenues were $90.6 million for the third quarter of fiscal 2009 as compared to net revenues of $101.7 million for the third quarter of fiscal 2008. Net revenues reflect an 8.5 percent decrease in comparable store sales and a 27.0 percent decrease in net revenues from the direct-to-consumer channel, partially offset by revenues from non-comparable stores.

·                  Operating income totaled $1.4 million for the third quarter of fiscal 2009 compared to $3.7 million for the third quarter of fiscal 2008.  Third quarter 2009 operating income included a $0.4 million one-time, non-recurring charge related to litigation settlement costs.

·                  Net income for the third quarter of fiscal 2009 totaled $1.1 million, or $0.07 per diluted share. Excluding the non-recurring litigation settlement charge, net income for the quarter would have been $1.5 million or $0.09 per diluted share. This compares to net income of $2.8 million or $0.17 per diluted share for the third quarter of fiscal 2008.

·                  As of October 3, 2009, the Company had $33.7 million of outstanding borrowings under its credit facility, borrowing availability of $19.6 million, and total inventory of $79.1 million. Average store inventory declined 10.4% percent at October 3, 2009 as compared to September 27, 2008.

Martin Hanaka, chairman and chief executive officer of Golfsmith commented, “Our third quarter results reflect continued sales challenges of discretionary products in the golf industry. While store traffic has begun to stabilize, consumers remain cautious about spending. Despite this, we are pleased with the solid unit market share gains we’ve earned.  We will also continue to closely manage our expenses and maintain leaner inventory levels due to uncertainty of future sales trends. We will also continue to find innovative ways to partner with our vendors to drive traffic and feel we are well positioned to emerge successfully from this challenging period.”

Second Quarter Highlights:

·                  Net revenues were $114.8 million for the second quarter of fiscal 2009 as compared to net revenues of $130.0 million for the second quarter of fiscal 2008. Net revenues reflect a 9.5 percent decrease in comparable store sales and a 28.0 percent decrease in net revenues from its direct-to-consumer channel.

·                  Operating income totaled $8.3 million for the second quarter of fiscal 2009 compared to $10.4 million for the second quarter of fiscal 2008.

·                  Net income for the second quarter of fiscal 2009 totaled $6.8 million, or $0.42 per diluted share. This compares to net income of $8.6 million or $0.54 per diluted share for the second quarter of fiscal 2008.

·                  As of July 4, 2009, the Company had $28.0 million of outstanding borrowings under its credit facility, borrowing availability of $38.7 million, and total inventory of $93.1 million. This compares to $34.6 million of outstanding borrowings under its credit facility, $33.0 million of borrowing availability, and $101.1 million of inventory at June 28, 2008.  Average store inventory declined 3.5 percent at July 4, 2009 as compared to June 28, 2008.

·                  During the second quarter of fiscal 2009, the Company relocated two of its existing stores and closed one store due to an expiring lease.   The Company also signed a lease for a property in Irvine, California for the opening of a retail store in the fourth quarter of fiscal 2009.

Martin Hanaka, chairman and chief executive officer of Golfsmith commented, “Our second quarter results reflect a sequential improvement in comparable store sales and a year-over-year gross margin improvement.  We continue to closely manage expenses and inventory without sacrificing product availability and have made significant improvements from a year ago.  Looking ahead, we will continue to invest prudently in our customer experience initiatives and be innovative as we work with our vendors to drive traffic in the second half of the year, since we do expect overall trends in the golf industry to remain challenging. As the industry continues to consolidate, we believe our Company is positioned to capture additional market share, and we look forward to resuming our store growth plans in fiscal 2010.”

First Quarter Highlights:

·                  Net revenues were $68.8 million for the first quarter of fiscal 2009 as compared to net revenues of $79.2 million for the first quarter of fiscal 2008. Net revenues reflect an 11.7 percent decrease in comparable store sales and a 24.8 percent decrease in net revenues from its direct channel.

·                  Operating loss totaled $5.4 million for the first quarter of fiscal 2009 compared to a loss of $5.2 million for the first quarter of fiscal 2008. The Company recorded a $0.5 million non-recurring charge, or $0.03 per diluted share, related to severance associated with organizational changes recorded in this year’s first quarter. Operating results for the first quarter of fiscal 2008 included a $1.8 million non-recurring charge, or $0.11 cents per diluted share, related to the same.

·                  Net loss for the first quarter of fiscal 2009 totaled $5.1 million, or a net loss per diluted share of $0.32. This compares to a net loss of $5.4 million or a net loss per diluted share of $0.34 for the first quarter of fiscal 2008.

·                  As of April 4, 2009, the Company had $45.2 million of outstanding borrowings under its credit facility, borrowing availability of $16.4 million, and total inventory of $94.1 million.  This compares to $65.4 million of outstanding borrowings under its credit facility, $2.2 million of borrowing availability, and $100.5 million of inventory at March 29, 2008.   Average store inventory declined 7.8% at April 4, 2009 as compared to March 29, 2008.

Martin Hanaka, Chairman and Chief Executive Officer commented, “While the recession continues to pressure spending in our industry, it is also making us a better organization as we focus on initiatives to increase efficiencies, reduce operating expenses and lower inventory levels, in which all areas we have made very good progress. As a result of these efforts, along with same stores sales that outperformed our plan for the quarter, we were able to generate free cash flow in the quarter and finish the period in an even stronger financial position. We will carry this improved operating platform, our differentiated merchandise assortment, and our Guest-First in-store experience into the future, and remain confident that we will gain market share.

Fiscal 2008 Highlights:

·                  Net revenues in fiscal 2008 decreased 2.4 percent to $378.8 million compared to net revenues of $388.2 million for the same period last year. Net revenues reflect a 6.3 percent decrease in comparable store sales and a 13.1 percent decrease in net revenues from the Company’s direct channel. Total net revenues represent 53 weeks in fiscal 2008 compared to 52 weeks in fiscal 2007. Comparable store sales are calculated on a 52-week basis in both fiscal years.

·                  The Company reported operating income of $2.3 million in fiscal 2008. This compares to an operating loss of $36.9 million in fiscal 2007, including the $43.0 million non-cash impairment charge to goodwill and other long-lived assets. Excluding the impairment charge, operating

Third Quarter Highlights:

·                  Net revenues totaled $101.7 million compared with net revenues of $106.5 million for the third quarter of fiscal 2007, a 4.5% decrease. Comparable store sales decreased 4.6% and net revenues from the direct channel decreased 11.6%.

·                  Operating income totaled $3.7 million compared with $4.9 million in the third quarter of fiscal 2007.

·                  Net income totaled $2.8 million, or $0.17 per diluted share compared with net income of $4.0 million, or $0.25 per diluted share in the third quarter ended September 29, 2007.

Martin Hanaka, chairman and chief executive officer of Golfsmith commented, “We had a good start to the third quarter as we made every effort to overcome the consumer headwinds by emphasizing our selling and service culture and through the tactical use of promotions. However, sales trends slowed dramatically in September as the economic environment deteriorated and the hurricanes hit key areas of Texas and Florida. Looking ahead, we will continue to focus on expense controls and inventory management as well as carefully execute promotions.”