Fitness financials: Nautilus shares hit new low after analyst downgrade, plus Life Time Fitness/Town Sports, Big 5, Forzani, Sport Chalet, Wal-Mart, Costco
Fitness financials: Nautilus shares hit new low after analyst downgrade. Analyst poll weighs in on Life Time Fitness, Town Sports. Big 5 Q4 sales drop, cuts profit outlook. Forzani reports holiday season sales, appoints corporate/franchise president. Sport Chalet releases preliminary Q3 '08 results. Wal-Mart December same-store sales rise 2.7 percent. Costco's December sales up.
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Nautilus shares hit new low after analyst downgrade
Shares of Nautilus (NYSE: NLS) fell to a new 52-week low on Jan. 10 after an analyst downgraded the company on restrained consumer spending and obstacles facing its turnaround plan.
Marc Bettinger of Stanford Group Co. said Nautilus may see flat sales this year as consumers hold off on purchasing some of its expensive equipment due to economic worries. He added that the company is faced with creating a turnaround plan with a recently reshuffled board of directors during a period of escalating recession fears.
“Developing a turnaround business plan in a decent economic environment would be difficult enough. Trying to assess the consumer landscape and what strategies will be effective in a challenging environment will be more formidable and riskier,” he wrote in a client note.
Bettinger lowered his Nautilus rating to “Sell” from “Hold” and slashed his price target to $3 from $7. The analyst also lowered his 2008 estimate to a loss of $0.10 per share from a profit of $0.15 per share.
Shares of Nautilus lost $0.35 to $3.66 on Jan. 10, having earlier hit a new low of $3.37. The stock previously traded in a range of $3.54 to $18.63.
Analyst poll weighs in on Life Time Fitness, Town Sports
In a recent fitness club poll, Scott Hamann of KeyBanc Capital Markets said he found solid fourth-quarter core membership growth with half of his contacts saying membership growth was up at least 5 percent to 10 percent from the year-ago period. Holiday gift cards and pre-New Year memberships also contributed to growth, he added.
Ancillary services spending remains strong as well, with 94 percent of respondents stating that spending on amenities, excluding personal training, was consistent with the previous year. Half of those surveyed said at least 20 percent of members took part in personal training offerings. Ancillary services include personal training, specialized classes, youth programs, spa treatments and food/nutritional products.
Hamann said investors need not worry so much about how recession fears will impact the group.
“We emphasize that investors are not fully appreciating the resiliency these companies have through challenging economic times, particularly as other leisure names may have more direct exposure to discretionary spending,” he wrote in a client note.
The analyst said a shift in consumer thinking to keeping up a healthy lifestyle should also lead fitness “to become more of a necessity as opposed to a luxury.”
Hamann cut his Life Time Fitness (NYSE: LTM) price target to $65 from $73 and lowered his Town Sports (Nasdaq: CLUB) price target to $14 from $18. He maintained “Buy” ratings on the two stocks.
On Jan. 10, shares of Life Time Fitness added $0.77 to close at $45.55, while Town Sports stock gained $0.12 to close at $10.21.
Big 5 Q4 sales drop, cuts profit outlook
Fourth-quarter sales for Big 5 Sporting Goods (Nasdaq: BGFV) fell 1 percent due to soft consumer spending and weaker demand for sneakers with wheels in the heels.
Revenue declined to $232.1 million from $234.5 million a year earlier. Also, the company said the holiday season was more difficult than it expected, and reported that its same-store sales fell 4.7 percent.
For the full year, sales grew 3 percent, to $898.3 million from $876.8 million. Same-store sales declined 1.0 percent.
Additionally, Big 5 cut its fourth-quarter profit outlook to a range of $0.25 to $0.28 per share, down from its previous forecast of $0.36 per share to $0.46 per share. For 2007, it now expects to earn between $1.22 and $1.25 per share, compared with an earlier forecast of $1.33 per share to $1.43 per share in profit.
Forzani reports holiday season sales, appoints corporate/franchise president
The Forzani Group (TSX: FGL), Canada’s largest retailer of sporting goods, said total retail sales for the 10 weeks ended Jan. 6, 2008, were up 21.3 percent from the prior year.
Excluding the impact of the acquisition of Athlete’s World, total retail system sales were up 14.3 percent. On a same-store basis, total retail system sales were up 11.1 percent, the company said, as consumers responded positively to the more aggressive promotions in place throughout the quarter. Corporate same store sales increased 7.4 percent, while the franchise division retail same store sales were up 18.5 percent.
The company also noted that corporate store margin rates softened versus the prior year, but same-store margin dollars continued to track ahead of the prior year. The company added that its inventory position is very clean as a result of the strong overall sales generated quarter-to-date.
In other company news: Tom Quinn, president of Forzani’s franchise group, has assumed the role of president for both the corporate and franchise businesses. In his newly expanded role, he will be responsible for all aspects of both the franchise and corporate retail groups. He joined the company in 1994.
Bill Gregson, formerly president and COO, has left the organization to pursue other opportunities, it said. Gregson joined Forzani in 1997 as the executive vice president of corporate retailing and was appointed president and COO in 2003.
Forzani said the reorganization is expected to result in a one-time charge to earnings of approximately $4.2 million.
Sport Chalet releases preliminary Q3 ’08 results
Sport Chalet (Nasdaq: SPCHA and SPCHB) released preliminary third-quarter results, sayings it sales and earnings were impacted by a challenging sales environment due largely to weak macroeconomic trends in the company’s markets, especially in its core Southern California market.
The company said it expects to report third-quarter net sales of approximately $116.0 million compared to $114.7 million for the same period in the prior year. Comparable store sales for the third quarter are expected to decline approximately 7.0 percent from the same period a year ago.
Including a non-cash impairment charge of approximately $2.1 million pre-tax, or $0.09 per diluted share, which the company now expects to record in relation to certain California stores, Sport Chalet anticipates reporting a loss per diluted share in the range of $0.06 to $0.09 for the third quarter, compared to earnings per diluted share of $0.28 in the prior year’s third quarter. Excluding the non-cash impairment charge, it anticipates that it will report earnings per diluted share in the range of breakeven to $0.03.
Management said it expects full fiscal year net sales will increase moderately over fiscal 2007, while comparable store sales are expected to decline 2 percent to 4 percent. Net income is expected to be lower than last year, it added.
Sport Chalet will report full financial results for the third quarter of fiscal 2008 in early February.
Wal-Mart December same-store sales rise 2.7 percent
Wal-Mart Stores (NYSE: WMT) reported a 2.7 percent rise in December same-store sales. Excluding fuel sales, which benefited from higher average gasoline prices, same-store sales rose 2.4 percent.
Total sales in the five weeks ended Jan. 4 added 8.4 percent at $46.6 billion from $43 billion last year. Wal-Mart stores delivered a 5.6 percent increase to $29.7 billion, while Sam’s Club stores had 4.3 percent higher sales of $4.94 billion. The weaker dollar boosted international sales, which rose 18.2 percent to $11.97 billion.
Costco’s December sales up
For the month of December, same-store sales rose by 7 percent at Costco (Nasdaq: COST). Net sales rose to $7.55 billion last month from $6.84 billion in December 2006.
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