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 The company wrote down a number of products during the quarter, purging itself of outdated, slow-selling, low-margin items in order to get ready for the “back-to-school” season.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.
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.)
Brunswick names mergers/acquisitions VP
Brunswick Corp. (NYSE: BC) has promoted Katie Krasnewich to vice president – mergers and acquisitions, reporting to Peter Leemputte, senior vice president and CFO. Krasnewich most recently was director of business development for Brunswick, and the company said she has been instrumental in securing and completing several of the company’s recent acquisitions. Krasnewich will be responsible for overall deal coordination and execution, which includes financial valuation, business justification and due diligence on merger and acquisition candidates across all Brunswick lines of business. Krasnewich joined Brunswick in 2003 after three years with Deutsche Bank Securities Inc., where she served in corporate investment banking.
Sears Holdings has bumpy Q1 on Nasdaq
Sears Holdings (NasdaqNM: SHLD) — reporting combined results for Sears and Kmart –posted a first-quarter net loss of $9 million, or 7 cents per share, which includes an accounting change of $90 million after taxes. Excluding that charge, Sears earned $81 million, or 65 cents per share. Quarterly revenue was $7.6 billion, or $12.8 billion including results from Sears for the full quarter. The retailer said quarterly sales fell 2.3 percent at Kmart stores as a result of poor weather that affected sales of spring merchandise, while revenue from merchandise sales and services rose 0.5 percent at U.S. Sears stores. The quarterly report also showed a steep drop in cash and a rise in inventory because of Kmart’s purchase of Sears. The company had $1.6 billion of cash and cash equivalents as of April 30, down from $7.4 billion before the deal closed. As of May 31, the company had opened 10 Sears Essentials stores and expects to have at least 50 by the end of 2005. It plans to convert about 400 Kmart stores into the Sears Essentials format by the end of 2007. Sears Holdings shares fell $8.83 to $146.08 on the Nasdaq after the news.
Foot Locker names new management
Foot Locker (NYSE: FL) has named Keith Daly the president and CEO of its Foot Locker Europe division, and Marla Anderson will replace him as president and CEO of the Lady Foot Locker division. Daly will report to Matthew Serra, chairman and CEO of Foot Locker, and Anderson will report to Rick Mina, president and CEO of Foot Locker – U.S.A. Both management changes are effective immediately.Â As of April 30, the company operated 492 stores in 14 countries in Europe, and 555 Lady Foot Locker in the United States.
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