Fitness financials: Forzani Group quarter a bit rocky, plus Bally, Costco, Wal-Mart, Sears

Fitness financials: Forzani Group quarter a bit rocky. Moody and S&P looking at Bally rating. Costco quarterly earnings up. Sears' store revenues down. Wal-Mart net sales up 10.8 percent.

Forzani Group quarter a bit rocky
The Forzani Group Ltd. (TSX: FGL) cut its earnings forecast for the fiscal year because of weak back-to-school sales, sending shares of the Calgary-based Canadian sporting goods giant to its worst level in about three years. Forzani, which operates under the banners Sport Chek, Coast Mountain Sports and Sport Mart, said it expected annual earnings to be in the range of CAD $0.84 to 0.90 cents per share, down from its previous guidance of between CAD $1.02 and $1.10 per share.

“Heavy competitive discounting in August combined with a change in the calendar, pushing Labor Day one week later, impacted sales in August. September saw a rebound with solid comparable store sales in both our corporate and franchise banners. Our back-half loaded promotional plans, which began in September, should continue to stimulate sales for the balance of the year,” Bob Sartor, CEO of Forzani, said in a statement. “Given the current volatile environment in retail sporting goods and our expectation that the price competition experienced in Ontario will continue for the balance of the year, management believes that a conservative downward revision is in order.”

Shares of Forzani dropped by CAD $1.13, or 9 percent, to CAD $10.95 on the Toronto Stock Exchange, marking their lowest level since November 2001.

The company — which recently announced plans to strongly pursue the specialty market including fitness (see SNEWS story, Oct. 11, 2004) as well as hockey, golf and running — said comparable store sales for the eight-week back-to-school period ended Sept. 27, 2004, fell 1.8 percent from last year. Total comparable store sales were CAD $152.6 million (USD $122 million, based on currency rates Oct. 8), off 3.6 percent during the same period a year ago. Comparable store sales at Forzani’s corporate stores eased 5.2 percent, while franchise stores increased 1.4 percent.

Moody and S&P looking at Bally rating
Bally Total Fitness Holding Corp.’s (NYSE: BFT) minimum Moody’s rating requirement to be maintained on the company’s 9-7/8 percent senior subordinated notes has been reduced from at least Caa1 to at least Caa2. This is an amendment to Bally’s recent $100 million securitization facility from J.P. Morgan Securities Inc., which is the lead arranger of Bally’s new $175 million five-year term loan, including the securitization facility. S&P’s current rating on the senior subordinated notes is CCC+. Bally’s senior bank lenders must still approve the required monthly amortization payments, which are scheduled to begin on Nov. 1. Payments would increase from $5 million to $8.33 million. If approval is not obtained, the company’s minimum rating required will revert to Caa1 by Moody’s and CCC+ by S&P. In addition this week, Bally will go to court to put forward an opposition to a complaint asserted by plaintiffs in a class action lawsuit. The opposition hearing is the final step before lead plaintiff and counsel is appointed. Plaintiffs began filing class action complaints in late May of this year after Bally restated revenues.Â

Costco quarterly earnings up
Costco Wholesale Corp.’s (NasdaqNM: COST) earnings rose 24 percent in its latest quarter, ending Aug. 29, 2004, lifted by improvement in both net sales and membership fees which offset a minor accounting charge. Its fiscal fourth-quarter earnings were $296.8 million, or 62 cents a share, up from $239.4 million, or 51 cents a share, a year earlier. Earnings per share exceeded analyst estimates of 56 to 58 cents. Costco’s net sales for the quarter increased 11 percent to $14.83 billion from $13.42 billion a year ago. Sales at stores open more than a year, or same-store sales, grew 8 percent.

Sears’ store revenues down
Sears, Roebuck and Co. (NYSE: S) reported that comparable domestic store revenues decreased 3.2 percent for the five weeks ended Oct. 2, 2004. Total domestic store revenues were $2.33 billion for the five-week period in September 2004, down 4.9 percent compared with the five weeks ended Oct. 4, 2003.

Wal-Mart net sales up 10.8 percent
Wal-Mart Stores, Inc. (NYSE: WMT) net sales for the five-week period ending Oct. 1, 2004, of $25.739 billion, an increase of 10.8 percent over 2003’s $23.239 billion. The Wal-Mart Division’s sales for the five-week period were $17.169 billion, up 9.4 percent over sales of $15.699 billion in the prior year. Comparable store sales for the five-week period were up 2.0 percent for the Wal-Mart division.

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