Fitness financials: Revolving door spins at Bally, plus Dick's, Hibbett, Sport Chalet, Amer, Foot Locker, Saucony

Revolving door spins at Bally
The revolving door at Bally Total Fitness (NYSE: BFT) is spinning at a breakneck pace as the struggling health club leader continues to try to dig out of its well-documented financial, personnel, stockholder and legal woes.

Last week, the company added two new board members — and lost one of them three days later. Not a great thing for a company looking for stability in the midst of accounting problems, class-action lawsuits, government investigations, a change in company philosophy, and attempts to sell its Crunch Fitness clubs (see SNEWS® story, May 16, 2005).  

On May 17, the company announced that its board of directors had appointed Marilyn R. Seymann, Ph.D., and David C. Wilhelm as directors of the company. Bally CEO Paul Toback said in a statement, “Our board will benefit greatly from these two new people and their strong backgrounds. Marilyn brings a national reputation as a respected authority on corporate governance issues and David has an impressive record as both a business man and a political strategist. Both of these professionals will serve us well as independent directors and knowledgeable advisors to the company.”

The “great benefits” lauded by Toback lasted oh so briefly. It announced just three days later that Wilhelm was leaving the post after the board learned “that one of the investments his companies made is in a business founded by another board member.” While Bally said that this didn’t infringe on any legal, ethical or corporate governance conflicts, the move was made to avoid any appearance of a conflict of interest. Probably good since the company has enough to deal with.

Meanwhile, as the shake-up on the company’s board was going on, Jon Harris left his position of vice president of business development and communications for a senior position with Sara Lee Food and Beverage Company.

SNEWS® View: How can a company move forward when it keeps being forced to take a step back?

Dick’s Q1 sales up 57 percent
Dick’s Sporting Goods (NYSE: DKS) reported net income for the first quarter, excluding merger integration and store closing costs, of $12.2 million, or $0.23 per share, as compared to earnings guidance of $0.18 to $0.20.

Including after tax merger integration and store closing costs of $19.5 million, or $0.36 per share, the company reported a net loss for the first quarter of $7.3 million, or $0.15 per share as compared to earnings guidance of a loss of $0.19 to $0.21 per share including merger integration and store closing costs. In 2004, it posted a net profit of $10.6 million, or $0.20 per share.

Total sales for the quarter increased 57 percent over last year to $570.8 million due to a comparable store sales increase of 3.2 percent, the opening of new stores, and the inclusion of the former Galyan’s operations in this year’s quarterly results. Dick’s said the conversion, re-merchandising, and grand re-opening of the former Galyan’s stores to Dick’s stores is essentially complete this quarter. The former Galyan’s stores will now be included in the comp store sales base beginning in the second quarter of fiscal 2006. Dick’s continues to expect total merger integration and store closing costs of approximately $70 million, of which $20 million was incurred in 2004.

During the first quarter, the company opened seven stores, and closed five stores — four Dick’s stores and one Galyan’s store all of which were stores in overlapping trade areas due to the Galyan’s acquisition. As of April 30, it was operating 236 stores, with approximately 13.6 million square feet, in 34 states. Also, Dick’s announced that Douglas Walrod has joined the company as the senior vice president of real estate and development. He was formerly with Sears, Roebuck & Co.

On May 17, stock opened at $36.25 and closed down 38 cents at $35.87.

Hibbett’s earnings beat analyst expectations
Hibbett Sporting Goods (NasdaqNM: HIBB) reported first-quarter net income of $10.7 million up 33.9 percent $8.0 million last year. Earnings per diluted share increased 39.4 percent to $0.46 compared with restated earnings of $0.33 in the prior year, beating analysts’ expectations of $0.42.

Net sales increased 19.0 percent to $114.8 million compared with $96.5 million in the same period last year. Comparable store sales increased 8.2 percent in the first quarter of fiscal 2006. Comparable store net sales data reflects sales for its Hibbett Sports and Sports Additions stores open through the 13-week period and the corresponding period of the prior fiscal year.

“We are pleased to exceed the $100 million mark in revenue for the second consecutive quarter,” said Mickey Newsome, chairman, president and CEO of Hibbett.

Hibbett opened 15 new stores and closed four stores during the first quarter, bringing the store base to 493 in 22 states. It plans to open a net of approximately 73 new stores in fiscal 2006, including a net of 16 to 19 stores in the second quarter.

Also, last August, the board authorized the repurchase of up to $30.0 million of the company’s common stock, and then increased the maximum authorization to $40.0 million in November. During the first quarter, the company repurchased 16,000 shares bringing the total shares repurchased to 861,400 shares for a total expenditure of approximately $19.5 million.

Sport Chalet to restate select quarterly financials for SEC
Another retailer caught up in the SEC’s revamp of lease accounting practices, Sport Chalet (NasdaqNM: SPCH) is reviewing its financials and expects to restate its previously filed annual and quarterly financial statements.

The effect on the its previously released Consolidated Statements of Income will be an increase in net income of $97,000 for the fiscal year ended March 31, 2004, and a reduction of net income of $117,000 and $353,000 for the fiscal years ended March 31, 2003, and March 31, 2002, respectively. The impact on previously released earnings per share is expected to be an increase of $0.01 for the fiscal year ended March 31, 2004, and a reduction in earnings per share of $0.02 and $0.05 for the fiscal years ended March 31, 2003, and March 31, 2002, respectively. The restatement of previously issued consolidated financial statements will not have an impact on total net cash flows during any of the periods amended, it said.

Amer reports ’05 guidance unchanged
Precor parent-Amer Sports hosted a Capital Markets Day for investors and analysts in London to brief the attendees about its strategy, financial and divisional highlights, as well as on the proposed acquisition of Salomon. CEO and President Roger Talermo confirmed that prospects for 2005 are unchanged: Amer Sports’ comparable full-year net sales in local currencies are expected to grow by 3 percent to 5 percent compared with last year. Earnings per share for 2005 are forecast to be Euro 0.90-1.05, compared to 2004’s Euro 0.96. For more information, go to www.amersports.com, and go to the Investor Relations section, Reports and Presentations.

Foot Locker up for the quarter
Foot Locker’s (NYSE: FL) first-quarter earnings rose 19 percent from last year, driven by higher-priced footwear sales in its U.S. stores. Net income rose to $58 million, or 37 cents per share, from $48 million, or 31 cents per share, a year ago. Sales were up 16 percent to $1.38 billion from $1.19 billion last year, and same-store sales increased 2.6 percent. Foot Locker said it remains comfortable that it will be able to continue to post income from continuing operations increases in the 10 percent to 20 percent range for the rest of 2005.

Saucony board declares cash dividend
Saucony’s (Nasdaq: SCNYA and SCNYB) board of directors has declared regular quarterly cash dividends of $0.050 per share on the company’s Class A Common Stock and $0.055 per share on the company’s Class B Common Stock. The dividends will be paid on July 14, 2005, to all stockholders of record at the close of business on June 16, 2005. The company’s corporate charter provides that cash dividends paid on the Class B Common Stock be in an amount equal to 110 percent of the amount paid on the company’s Class A Common Stock.

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