Outdoor financials: Forzani stock drops on Q1 net loss, plus Johnson Outdoors

Forzani stock drops on Q1 net loss
Canada’s Forzani Group Ltd. (FGL.TO) reported a first-quarter net loss of CDN $7.4 million (USD $6 million), or $0.23 per diluted share, compared to a profit of CDN $0.9 million (USD $722,892), or $0.03 per share in the prior year. Its stock dropped more than 12 percent to CDN $10.20 (USD $8.19) on the Toronto Stock Exchange, before recovering a bit to CDN $10.50 (USD $8.43), down CDN $1.15 (USD $0.92) or 9.9 percent.

Working under the retail brand names of National Sports, Sport Chek, Coast Mountain Sports and Sport Mart, its retail sales for the quarter were CDN $259.8 million (USD $208.6 million), up from CDN $227.7 million (USD $183.1 million) last year.

“One necessary purge was better than a continuing lingering situation,” Bob Sartor, Forzani’s CEO said in a call to analysts. “The faster we move to the revamped stores, the revamped assortment, the revamped marketing, the faster we can get onto the next growth wave we feel is just ahead of us.” The company wrote down a number of products during the quarter, purging itself of outdated, slow-selling, low-margin items in order to get ready for the “back-to-school” season.

Revenue, consisting of corporate store sales, wholesale sales, service income, equipment rentals, franchise fees and franchise royalties, was CDN $238.2 million ($191.3 million), a CDN $9.6 million (USD $7.7 million), or 4.2 percent increase over the 13-week period last year due primarily to the acquisition of National Gym Clothing Limited (National Sports) in January. Combined gross margin for the 13 weeks ended May 1, 2005, was down 170 basis points to 29.0 percent of revenue, from 30.7 percent in the prior year. The company said it was due to a combination of factors, including various initiatives to ensure appropriate inventory positions as a weak winter season was exited, and the liquidation and subsequent closure of a competitor in the Ontario market during the quarter, and its effect on regional margins. In absolute dollars, the combined gross margin decreased to CDN $69.1 million (USD $55.5 million) from CDN $70.2 million (USD $56.3 million) last year.

Forzani said same-store sales from corporate locations were down 4.3 percent, as a result of soft sales in inline skates, ski and snowboard, and licensed hockey products. Comparable corporate clothing sales, exclusive of winter categories and licensed products were down 1.7 percent, while footwear was up 5.6 percent, it said. Franchise comparable store sales were up 9.4 percent on the strength of athletic clothing and footwear. On a combined basis, same-store sales were up 0.3 percent.

Comparable store operating costs were 29.6 percent of corporate store revenues, versus 28.8 percent in the prior year, a result of the reduced sales volume. The comparative costs in absolute dollars decreased CDN$700,000 (USD $562,249) or 1.7 percent. Forzani said the overall store operating expense increase reflects the addition of 19 National Sports stores coupled with the opening (net of closings), in the past year, of 12 corporate stores.

(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 June 8.)

Johnson Outdoors seeks new CFO
Johnson Outdoors (Nasdaq: JOUT) is on the hunt for a new CFO with the resignation of Paul Lehmann for undisclosed reasons. Lehmann, also a company vice president, will stay through the end of July to assist in the transition. If no replacement is found by that time, David Johnson, the company’s director of treasury services and financial analysis, will become interim CFO until the company hires a new CFO. Russell Reynolds Associates, an executive recruitment firm, has been retained to assist Johnson in its search.

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