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Saturday, May 28, 2022

Is Sport Chalet Getting Set for Earnings Streak?

After reporting its most successful quarter in seven years, there is one simple question for management at Sport Chalet Inc.: Can they keep it up? The La Cañada-Flintridge-based chain has had a terrible run, reporting loss after loss as the recession, cheaper retail chains and Amazon.com and other Web-based businesses have decreased sales at the premium sporting goods retailer. But in its fiscal third quarter ended Dec. 29, Sport Chalet reported net income of $1.5 million (10 cents a share), compared with a net loss of $1.9 million (-13 cents) in the same quarter last year. Revenue, however, fell 2 percent to $95.3 million. The results follow company initiatives to adapt, offering same-day office or home delivery and store pickup for online sales, as well as a redesign of its website. The chain also has focused on cutting costs. In the last year, it has closed three under-performing stores and opened what it calls a “next generation” store in downtown L.A., which measures close to half the size of its conventional outlet. Still, one analyst isn’t convinced the positive results can fuel long-term success. “None of their challenges have gone away,” said Neil Stern, a senior partner at Chicago-based retail consulting firm McMillan Doolittle LLP. “The question at this point really is can they grow their Web sales fast enough to cover declining store sales.” Indeed, the company has a long way to go for recovery. Sport Chalet has recorded a net loss of $4.4 million (31 cents) in the first nine months of its fiscal year, compared to a net loss of $1 million (7 cents), in the same period a year earlier. And since its high of $11.39 in April 2007, the share price has plummeted nearly 90 percent. It closed Feb. 5 at $1.32. While online sales increased 9 percent in the quarter from the previous year – and a 22 percent jump through the holidays – in-store sales rolled back a bit more than 1 percent. What’s more, Sport Chalet is still working with Cappello Global LLC of Santa Monica to explore strategic options, which could include a potential company sale. Sport Chalet has 51 stores in Arizona, California, Nevada and Utah. Chief Executive Craig Levra credits cutting costs for the company’s successful quarter. “Those savings are evident in our third-quarter results, and we are committed to making sure every asset we have contributes profitably to our business,” he said in a statement. But many retailers experience swells through the holiday season, and Stern isn’t overly optimistic the company can repeat in three months. “It’s a highly seasonal business, so the next quarter is going to be tough,” Stern said. “But you’ve got to give them their props for the great performance.”

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