Sport Chalet's losses softening

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Nov 06, 2009 (San Gabriel Valley Tribune - McClatchy-Tribune Information Services via COMTEX) -- SPCHB | Quote | Chart | News | PowerRating -- LA CANADA FLINTRIDGE -- Cautiously optimistic.

That's how Sport Chalet president and CEO Craig Levra feels as his company moves closer to the holiday season and looks toward 2010.

"We are pleased with our ability to execute our business plan in what continues to be a challenging economic environment," Levra said in a statement this week. "We remain focused on effectively managing our inventory and expense levels."

Amid the nation's worst economic downturn since the Great Depression, the La Ca ada Flintridge-based sporting goods chain continues to lose money.

But the company's latest earnings report shows that things are beginning to turn around.

Sport Chalet posted a net loss of $1.2 million, or 9 cents per share, for the second quarter of fiscal 2010, compared with a loss of $4.2 million, or 30 cents per share, for the same period a year earlier.

Results for the six months that ended Sept. 27, 2009, also showed a significant net loss -- $4.2 million. But that was about half as much as the $8.7 million the company lost in the same period a year earlier.

James D. Ragan, an equity analyst with Crowell, Weedon and Co., said things are looking up for the retailer.

"Their cash flow has been positive this year, which is keeping the banks at bay," he said. "And they're well above their target. They earned $4 million EBITDA (earnings before interest, taxes, depreciation and amortization), so they have

enough cash flow to cover their expenses."

Sport Chalet has differentiated itself from other sporting-goods chains by offering deeper expertise in such areas as dive/scuba gear, cycling equipment and skiing and snowboarding.

Big 5 Sporting Goods, by contrast, has established itself as a value-oriented retailer. Dick's Sporting Goods, which Ragan described as a "more formidable opponent," will likely present more of a challenge as it opens more locations in Southern California.

But competing low prices might not be part of the equation, he said.

"Dick's has big commitments to a lot of licensed goods with companies that don't like to discount their merchandise," Ragan said. "They won't be competing so much on price as on selected brand names."

In March, Sport Chalet announced that it had amended its credit line with Bank of America.

At that time, Levra said Sport Chalet had asked for and received "tremendous help from all our partners across every spectrum of our business, from landlords and developers to merchandise vendors, IT vendors, accountants and attorneys, marketing partners, and most of all our world-class employees."

Sport Chalet shares gained a penny Thursday to close at $3.40. During the past 52 weeks, the shares have ranged from a high of $5.37 to a low of 40 cents.

kevin.smith@sgvn.com

(626) 962-8811, Ext. 2701

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