SPCH Sport Chalet (MM)

Sport Chalet Reports Second Quarter Net Income Increased 22% And Continued Expansion LOS ANGELES, Nov. 3 /PRNewswire-FirstCall/ -- Sport Chalet, Inc. announced the results for its second quarter ended September 30, 2003. Sales for the period increased from $56.3 million last year to $61.8 million this year, a 9.8% increase. The increase is the result of opening two stores in late November 2002, aided by a same store sales increase of 3.7%. The gross profit margin increased to 29.9%, compared to 29.8% in the second quarter of last year, as a result of the Company's continued focus on inventory management which yielded lower markdowns. Selling, general and administrative expenses, as a percentage of sales, decreased from 25.5% for the three months ended September 30, 2002, to 25.2% for the same period this year primarily a result of higher same store sales. As a result, net income increased 22.0% from $1.4 million, or $0.20 per diluted share, in the second quarter last year to $1.7 million, or $0.25 per diluted share. During the six months ended September 30, 2003, sales increased from $107.5 million last year to $115.1 million this year, a 7.1% increase. The increase is a result of opening two stores in late November 2002, aided by a same store sales increase of 1.0%. The gross profit margin increased 50 basis points from 28.4% for the six months ended September 30, 2002, to 28.9% for the same period this year due to lower markdowns as a result of the Company's focus on improved inventory procurement and administration. Selling, general and administrative expenses, as a percentage of sales, increased from 26.0% for the six months ended September 30, 2002, to 27.2% for the same quarter this year as a result of higher advertising expense attributed to the timing of vendor reimbursements and the write-down of undepreciated assets resulting from two large scale remodels in the first quarter. Consequently, net income decreased from $1.5 million, or $0.22 per diluted share, for the six months ended September 30, 2002, to $1.1 million, or $0.16 per diluted share, for the same period this year. In addition to the previously announced three new locations opening this fall, the Company has committed to three additional locations set to open in fiscal 2004/2005. The Company's expansion to Northern California will continue next year with new locations in the Sacramento communities of Roseville and Elk Grove. The third opening, located in Arcadia will further strengthen the Company in its primary Southern California market. To support continued growth the Company has made two executive promotions. Jeff Lichtenstein, a 14 year veteran of the Company, has been promoted to Senior Vice President of Risk Management and Value Added Services and Tim Anderson has been promoted to Vice President of Store Operations. Commenting on the results, Craig Levra, Chairman and CEO said, "This quarter's results are a great improvement over the challenges we faced in the first quarter. I am pleased that our strategic focus provided greater gross profits and with continued efforts placed on leveraging overhead we will be able to maximize our bottom-line." Mr. Levra continued, "I am very excited about our continuing expansion plans. With the addition of the Roseville and Elk Grove sites, combined with the Antioch and Central Sacramento locations opening this fall, we will begin to build synergies of distribution and marketing, just as we have in our Southern California market." Sport Chalet, founded in 1959, is a leading operator of full service specialty sporting goods superstores in Southern California and Southern Nevada. The Company offers over 35 services for the serious sports enthusiast, including custom golf club fitting and repair, ski rental and repair, SCUBA training and certification, dive charters, team sales, racquet stringing, and bicycle tune up and repair throughout its current 28 locations. The address for Sport Chalet's web site is http://www.sportchalet.com/ . Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the competitive environment in the sporting goods industry in general and in Company's specific market areas, inflation, changes in costs of goods and services, the weather and economic conditions in general and in specific market areas. These and other risks are more fully described in the Company's filings with the Securities and Exchange Commission. SPORT CHALET, INC. CONDENSED STATEMENTS OF INCOME Three months ended Six months ended September 30, September 30, 2003 2002 2003 2002 Net sales $61,818,702 $56,327,344 $115,127,978 $107,532,004 Cost of goods sold, buying and occupancy 43,305,377 39,541,506 81,841,640 76,964,847 Gross profit 18,513,325 16,785,838 33,286,338 30,567,157 Selling, general and administrative expenses 15,580,745 14,340,812 31,302,214 27,940,301 Income from operations 2,932,580 2,445,026 1,984,124 2,626,856 Interest expense (55,746) (84,585) (89,756) (124,527) Income before taxes 2,876,834 2,360,441 1,894,368 2,502,329 Income tax provision 1,149,000 943,000 760,000 1,001,000 Net income $1,727,834 $1,417,441 $1,134,368 $1,501,329 Earnings per share: Basic $0.26 $0.21 $0.17 $0.23 Diluted $0.25 $0.20 $0.16 $0.22 Weighted average number of common shares outstanding: Basic 6,633,667 6,617,667 6,631,667 6,610,806 Diluted 6,944,024 6,939,971 6,937,438 6,970,037 SPORT CHALET, INC. CONDENSED BALANCE SHEETS September 30, March 31, 2003 2003 (Unaudited) Assets Current assets: Cash $3,665,797 $4,230,003 Accounts receivable, less allowance of $25,000 1,002,537 1,090,519 Merchandise inventories 61,725,465 50,886,630 Prepaid expenses and other current assets 2,281,159 2,038,588 Refundable income taxes -- 58,990 Deferred income taxes 1,279,815 1,325,249 Total current assets 69,954,773 59,629,979 Furniture, equipment and leasehold improvements-net 27,545,941 27,095,314 Deferred income taxes 261,257 66,281 Other assets 96,441 109,905 Total assets $97,858,412 $86,901,479 Liabilities and stockholders' equity Current liabilities: Bank overdraft $5,197,929 $5,764,355 Accounts payable 18,940,155 9,353,444 Salaries and wages payable 1,927,191 2,191,335 Income taxes payable 746,488 -- Other accrued expenses 5,022,864 5,041,753 Total current liabilities 31,834,627 22,350,887 Deferred rent 5,571,957 5,276,696 Stockholders' equity Preferred stock, $.01 par value: Authorized shares - 2,000,000 Issued and outstanding shares - none -- -- Common stock, $.01 par value: Authorized shares - 15,000,000 Issued and outstanding shares - 6,635,334 at September 30, 2003 and 6,628,334 at March 31, 2003 66,353 66,283 Additional paid-in capital 22,164,863 22,121,369 Retained earnings 38,220,612 37,086,244 Total stockholders' equity 60,451,828 59,273,896 Total liabilities and stockholders' equity $97,858,412 $86,901,479 DATASOURCE: Sport Chalet, Inc. CONTACT: Howard Kaminsky, Exec. VP-CFO of Sport Chalet, Inc., +1-818-949-5386 Web site: http://www.sportchalet.com/

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