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Sports Authority fumbles
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October 6, 1998: 12:18 p.m. ET
Company anticipates weak 3Q, $55M after-tax charge for restructuring
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NEW YORK (CNNfn) - Sports Authority, Inc. reported Tuesday that it will post a sharp loss in the third quarter amid a $55 million after-tax charge related to the restructuring of its business.
Fort Lauderdale, Fla.-based Sports Authority said its per share loss will fall between 27 cents and 32 cents excluding the charge and between $1.99 and $2.04 including the charge.
For the same period last year, the company reported earnings of 6 cents per share.
Wall Street analysts had forecast a loss of 3 cents per share.
Shares of Sports Authority (TSA) fell 9/16 to 6-3/16 on the New York Stock Exchange in late morning trade.
The $1.72 per share after-tax charge is related to 18 store closings, inventory writedowns, severance payments, tax restructuring costs and asset impairments for six stores that will remain open.
Third quarter sales are expected to be about $365 million, with comparable-store sales declining between 5 percent and 5.5 percent.
The company blamed the difficult footwear environment, as well as continued softness in men's apparel and golf products, for weaker-than-expected results.
"There's a glut of inventory out there," William Armstrong, analyst for Fahnestock & Co., said. Sports Authority is "in a difficult environment industry-wide."
In fact, the athletic-retailing sector has been mired in the doldrums since the second half of 1997, and Sports Authority isn't the only company to be hit by the cyclical downturn.
Venator Group Inc. (Z) posted disappointing earnings and called off a planned $580 million merger with Sports Authority in August, citing adverse market conditions.
The New York-based retailer also announced last month it is selling its 357-store German Woolworth operations in an attempt to jump-start its sagging athletic-goods business.
Denver-based Gart Sports Co. (GRTS) also had hoped to form an alliance with Sports Authority, but the latter rebuffed the $441 million offer it said would do more harm than good for shareholders.
Although Armstrong applauded Sports Authority's restructuring measures, he said prospects for long-term growth were poor.
"They've throttled back on expansion plans," the analyst said, "…which shows they are dealing with reality instead of just growing (the company) blindly. But the reality is you can't grow in this market."
"They don't have an easy road ahead," he added.
The store closings will take place in the latter part of the fourth quarter, after the holiday season.
The company said its multi-store market strategy should result in opportunities at other operations for staff affected by the closings. 
-- by staff writer Nicole Jacoby
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