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Strategic initiatives bolster Forzani Q2 results
09 Sep '10
5 min read
Fiscal Second Quarter Financial Results:
Compared with its peer group of North American sporting goods retailers, FGL's same-store sales have been less volatile since the onset of the recession two year ago. FGL increased same-store sales by 4.4% for the second quarter of fiscal 2011, which more than offset a decline of 1.0% in the second quarter of the prior year.
FGL's total revenue was up 6.5% from a year earlier led, by a 5.6% increase in retail sales from corporate stores. Augmenting the increase in the retail business, wholesale revenues rose 9.0% overall. This included a 14.4% increase in wholesale sales to third parties made by our INA International division, partly due to timing of shipments from factories in China and partly due to growth, especially for hockey equipment. This also included a 7.0% improvement in sales to franchisees attributable to late receipt of Q1 shipments in Q2.
Retail system sales, which include sales from corporate and franchise stores, were $360.8 million, an increase of $12.4 million, or 3.6%, from the comparable 13-week sales of $348.4 million a year earlier.
Gross profit was $109.2 million, up 10.1% from $99.2 million a year earlier, and gross margin was 34.6% of revenue compared with 33.4% of revenue a year earlier. Gross profit growth outpaced revenue due to improvements in margins in corporate retail as well as each of our wholesale businesses.
Store operating expenses rose $2.8 million or 4.0% for the fiscal 2011 second quarter from a year earlier reflecting increased wage costs to support the sales growth achieved. As a percentage of retail revenues, store operating expenses fell to 31.6% from 32.0% in fiscal 2010. Same-store operating expenses were 29.0% of corporate store revenue compared to 30.0% in the prior year. Same-store expenses, in absolute dollars, increased $0.6 million or 1.0%.
General and administrative expenses rose both on a run rate and absolute dollar expenditure basis compared with a year earlier. The absolute dollar increase of $2.4 million was primarily the result of a planned shift in the quarter, of $1.8 million in net advertising expenditures to support various marketing initiatives designed to drive execution of FGL's strategic plan.
The Company has also increased its accruals for both performance-based and stock-based compensation by $0.9 million in recognition of its improved earnings year to date. There were no hostile proxy contest expenses in the second quarter of fiscal 2011, a saving from the prior year of $1.6 million. However, the saving was offset by an increase in spending on information technology improvements as noted above in the strategic plan update.
Earnings before interest, taxes and amortization, ("EBITA") was $11.7 million, up 69.6% from $6.9 million in the second quarter of last year.
Loss before income taxes was $2.6 million, compared with pre-tax losses of $6.3 milliona year earlier. Cash flow from operations increased to $9.8 million, or $0.33 per share, from $6.1 million, or $0.20 per share, in the prior year.
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Compared with its peer group of North American sporting goods retailers, FGL's same-store sales have been less volatile since the onset of the recession two year ago. FGL increased same-store sales by 4.4% for the second quarter of fiscal 2011, which more than offset a decline of 1.0% in the second quarter of the prior year.
FGL's total revenue was up 6.5% from a year earlier led, by a 5.6% increase in retail sales from corporate stores. Augmenting the increase in the retail business, wholesale revenues rose 9.0% overall. This included a 14.4% increase in wholesale sales to third parties made by our INA International division, partly due to timing of shipments from factories in China and partly due to growth, especially for hockey equipment. This also included a 7.0% improvement in sales to franchisees attributable to late receipt of Q1 shipments in Q2.
Retail system sales, which include sales from corporate and franchise stores, were $360.8 million, an increase of $12.4 million, or 3.6%, from the comparable 13-week sales of $348.4 million a year earlier.
Gross profit was $109.2 million, up 10.1% from $99.2 million a year earlier, and gross margin was 34.6% of revenue compared with 33.4% of revenue a year earlier. Gross profit growth outpaced revenue due to improvements in margins in corporate retail as well as each of our wholesale businesses.
Store operating expenses rose $2.8 million or 4.0% for the fiscal 2011 second quarter from a year earlier reflecting increased wage costs to support the sales growth achieved. As a percentage of retail revenues, store operating expenses fell to 31.6% from 32.0% in fiscal 2010. Same-store operating expenses were 29.0% of corporate store revenue compared to 30.0% in the prior year. Same-store expenses, in absolute dollars, increased $0.6 million or 1.0%.
General and administrative expenses rose both on a run rate and absolute dollar expenditure basis compared with a year earlier. The absolute dollar increase of $2.4 million was primarily the result of a planned shift in the quarter, of $1.8 million in net advertising expenditures to support various marketing initiatives designed to drive execution of FGL's strategic plan.
The Company has also increased its accruals for both performance-based and stock-based compensation by $0.9 million in recognition of its improved earnings year to date. There were no hostile proxy contest expenses in the second quarter of fiscal 2011, a saving from the prior year of $1.6 million. However, the saving was offset by an increase in spending on information technology improvements as noted above in the strategic plan update.
Earnings before interest, taxes and amortization, ("EBITA") was $11.7 million, up 69.6% from $6.9 million in the second quarter of last year.
Loss before income taxes was $2.6 million, compared with pre-tax losses of $6.3 milliona year earlier. Cash flow from operations increased to $9.8 million, or $0.33 per share, from $6.1 million, or $0.20 per share, in the prior year.
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The Forzani Group Ltd
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