Fitness financials: Forzani reports drop in Q2 profit, plus Collective Brands, Winmark, Costco

Forzani reports drop in Q2 profit

Forzani Group Ltd (TSX: FGL) said its second-quarter profit declined as consumers spent less due to a sluggish Canadian economy. Its retail banners include Fitness Source, Sport Chek, Sports Experts and Coast Mountain Sports.

Net income fell to CDN $1.5 million (USD $1.4 million), or CDN $0.05 a share (USD $0.04), in the quarter ended Aug. 3, from CDN $5.4 million (USD $5.05 million), or CDN $0.16 a share (USD $0.14), in the same period last year. Cash flow from operations decreased to CDN $10.9 million (USD $10.1 million), or CDN $0.35 per share (USD $0.32), from CDN $13.8 million (USD $12.9 million), or CDN $0.41 per share (USD $0.38), in the prior year.

Excluding the impact of the acquisition of Athletes World, earnings for the quarter were CDN $1.9 million (USD $1.7 million), or CDN $0.06 (USD $0.05).

Revenue rose to CDN $295.6 million (USD $276.4 million) from CDN $292.4 million (USD $273.4 million).

Sales at corporate stores open more than one year fell 6.5 percent, and sales at franchise stores were 0.6 percent lower.

Combined gross margin for the 13 weeks ended Aug. 3 was 35.8 percent of revenue, or CDN $105.8 million (USD $98.9 million), compared to 34.9 percent, or CDN $102.1 million (USD $95.4 million) in the previous year.

Retail system sales for the quarter were CDN $356.7 million (USD $333.6 million), a 1.5-percent increase from the comparable 13-week sales of CDN $351.3 million (USD $328.5 million).

Corporate-owned stores, including flagship Sport Chek, represent about 60 percent of revenue, but their performance has lagged sales growth at franchise stores, such as Sports Experts and Nevada Bob’s Golf, the company said.

In June the company said it planned to test new types of retail offerings, including S3 stores, which sell snow, skate and surf merchandise.

Also, the company declared a dividend of CDN $0.075 (USD $0.070) per Class A common share, payable on Nov. 3 to shareholders of record on Oct. 20.

(Conversion of Canadian dollars into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Sept. 3.)

Collective Brands’ Q2 sales up 30.4 percent

Second-quarter net sales for Collective Brands (NYSE: PSS) were up 30.4 percent, including the addition of Stride Rite. Collective Brands also owns Saucony and Hind, which were part of the Stride Rite acquisition.

For the quarter ended Aug. 2, net sales were $911.7 million. Net sales for Payless and Stride Rite were $704.4 million and $207.3 million, respectively, for the second quarter of 2008.

Comparable store sales, including Payless Latin America, increased 0.2 percent, as higher retail prices offset lower unit volume.

Second-quarter net earnings were $8.1 million, or $0.13 per diluted share including $36.2 million in pre-tax expenses, or $0.41 per share, related to litigation matters. Excluding the litigation items, earnings were $33.6 million compared to second-quarter net earnings of $24.9 million in 2007.

Second-quarter earnings per diluted share, excluding litigation items, were $0.54 an increase of 42.1 percent compared to second-quarter earnings per diluted share of $0.38 in 2007.

Selling, general and administrative (SG&A) expenses were 28.4 percent of sales in the second quarter of 2008, an improvement of 30 basis points compared to the second quarter of 2007. SG&A expenses were $259.2 million in the second quarter of 2008, up $58.2 million versus the prior year period due to the addition of Stride Rite.

Net interest expense in the second quarter was $16.8 million compared to net interest expense of $0.8 million last year. Its income tax benefit was $2.8 million.

Collective Brands inventory was $483.3 million at the end of the quarter, up $113.3 million compared to the same period last year due to the addition of $136.9 million of Stride Rite inventory.

Collective Brands said it anticipates an operating profit growth rate in the mid-teens over time. This long-term goal is predicated on low-single-digit comparable store sales growth. The company also anticipates that comparable store sales growth may be below its long-term goal.



Winmark names new CFO

Winmark Corp. (Nasdaq: WINA) has appointed Tony Ishaug as its chief financial officer. He was recently chief financial officer and chief operating officer of the Department 56 division of Lenox Group. He has served in a variety of accounting, treasury and operational capacities over a 12-year career at Lenox.



Costco same-store sales rise 9 percent in August

Costco (Nasdaq: COST) reported a 9-percent rise in same-store sales for August as higher gas prices boosted sales.

Same-store sales in the United States rose 9 percent and jumped 6 percent overseas during the month. Excluding the effect of higher gas prices, U.S. same-store sales rose 6 percent.

Total sales for the month climbed 12 percent to $5.41 billion from $4.84 billion in the year-ago period.



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