Forzani Group FGL posts Q2 results

03 Sep '08

5 min read

The Forzani Group Ltd, Canada's largest retailer of sporting goods, reported fiscal 2009 results for the 13-week second quarter and 26-week period ended August 3, 2008.

For the Second Quarter:
Earnings and Earnings Per Share:
Net earnings for the second quarter were $1.5 million, or $0.05 per share, compared to the prior year's second quarter of $5.4 million, or $0.16 per share. Cash flow from operations decreased to $10.9 million, or $0.35 per share, from $13.8 million, or $0.41 per share, in the prior year.

Sales:
Retail system sales for the quarter were $356.7 million, an increase of $5.4 million, or 1.5% from the comparable 13-week sales of $351.3 million.

Same store sales in corporate locations were down 6.5% and 0.6% in franchise locations, over the fiscal 2008 second quarter, for an overall same store sales decrease of 4.2%. These results were on top of prior year same store increases of 0.4% and 6.1% respectively in Corporate and Franchise businesses.

Revenue, consisting of corporate store sales, wholesale sales, service income, equipment rentals, franchise fees and franchise royalties, was $295.6 million, up $3.2 million, or 1.1% over the comparable period last year. Wholesale sales to the franchise network increased 11.3% as product receipts, delayed in the first quarter, were received and moved through to franchise outlets. Those increases were offset by declines in the opportunity and licensed business which depends largely on U.S sales.

Gross Margins:
Combined gross margin for the 13 weeks ended August 3, 2008 was 35.8% of revenue, or $105.8 million, compared to 34.9%, or $102.1 million in the previous year. Wholesale margins improved over the prior year while retail margins were down slightly over the prior year reflecting the impact of the Athletes World acquisition on the overall business. Athletes World, which emerged from Companies' Creditor Arrangement Act "CCAA" protection during the quarter, saw its margins impacted by the liquidation of aged inventories. The Company expects that Athletes World will be fully stocked with fresh inventory in time for the important Back to School business of the third quarter of fiscal 2009.

Expenses:
Store operating expenses, as a percent of corporate store revenue, were 29.7% against the prior year of 27.7%, a reflection of the addition of Athletes World and reduced sales volumes. Same store operating costs were 28.2% of corporate store revenue, 26.3% in the prior year. Same store costs, in absolute dollars, increased $0.1 million or 0.1%.

General and administrative expenses were 8.5% of total revenue versus the prior year's 7.6%, attributable to the Athletes World acquisition. Of the net absolute dollar increase of $2.9 million, fully $2.7 million was related to the addition of the Athletes World infrastructure.

Earnings before interest, taxes and amortization ("EBITA") were $14.9 million, compared to $20.9 million for the 13-week period last year.

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