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Shabby sales hit TSA's 2Q
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August 11, 1998: 6:40 p.m. ET
Profits plunge 60% at sporting goods retailer on soft sales of key products
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NEW YORK (CNNfn) - The Sports Authority Inc. said Tuesday its second-quarter earnings plunged nearly two-thirds from year-ago levels amid disappointing sales in key fitness and apparel lines.
Net income at TSA, the world's largest sporting goods retailer, slid 60 percent to $3.83 million, or 12 cents per diluted share, from $9.56 million, or 30 cents per share a year earlier. The results fell short of TSA's own profit warning, in early July, of a 12 to 14 cent per-share decline from the comparable period a year ago.
Sales in the second quarter rose 11 percent to $427 million from $383 million. Comparable store sales fell 2.8 percent.
The results were released after shares of TSA (TSA) ended down 2-5/16, at 9-1/2, Tuesday on the New York Stock Exchange.
TSA's chairman and chief executive officer, Jack Smith, attributed the earnings tumble largely to disappointing sales in men's and licensed apparel, footwear and fitness categories.
"These sales shortfalls resulted in higher inventory levels per store and increased markdowns, especially in the footwear category," Smith said. "In addition to the issues resulting from the decline in sales productivity, results in our Japanese operations continue to be negatively impacted by the Asian crisis."
TSA said inventory levels, on a per-store basis, increased 5.6 percent to $2 million. Gross margins fell to 26.6 percent, compared to 28.3 percent a year ago.
Through the first six months of 1998, TSA reported net income of $81,000, or zero cents per share, down from $12.16 million, or 38 cents per share, in the first half of 1997. Sales for the 26-week period ended July 26 rose to $773.7 million from $703.1 million.
TSA said it opened five new locations in the second quarter and an additional five stores in the third quarter, bringing to 211 the total number of superstores in 32 U.S. States, Canada and Japan.
Earlier Tuesday, TSA rejected a proposal by Gart Sports Co., the No. 2 sporting goods retailer, for a strategic alliance with its bigger rival. TSA turned down the offer, under which Gart would have bought 70 percent of TSA's outstanding stock, after citing concerns about the impact of an alliance on TSA share value.
In May, Venator Group, the former Woolworth, agreed to merge with TSA for about $580 million in stock plus the assumption of debt. That deal is yet to be approved by TSA shareholders.
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The Sports Authority
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