Sport Chalet's Growth Strategy

Sport Chalet, which lost money for the year but attributed the loss to one-time recapitalization expenses, opened three stores in Arizona on one day in the latest fiscal year and expects to open five new stores in fiscal 2007. Craig Levra, chairman and CEO, pointed out in the conference call that, "While we continue to expand our geographic diversity, we are evaluating existing markets to create market density." Toward that end, the company opened a store in Foothill Ranch in February that was the chain's 40th and increased its penetration in the Orange County market.

Sport Chalet, which ended its fiscal year on March 31, reported record sales and net income for the year, excluding the recapitalization. With the recapitalization expenses, it lost about a penny a share, or $87,000, compared with a 2005 profit of $6.2 million, or 44 cents per share. The recapitalization expenses amounted to an after-tax charge of $7.8 million, or 56 cents per diluted share.

Without the recap expenses, net income for the fourth quarter increased 126.9% to $1.6 million, or 12 cents per share, compared with $722,000, or five cents per diluted share, for the fourth quarter last year. For the year, net income increased 25.6% to $7.8 million, about 55 cents a share. Comparable store sales for the quarter increased 5.7%.

Levra cited "a strong fourth quarter." He pointed out that sales for the fiscal year increased 11% to $343.2 million and comparable store sales increased 1.9% for the year after last year's 5.7% gain.

Sport Chalet, founded in 1959 by Norbert Olberz, operates in California, Nevada and Arizona. In addition to retail sales, the company offers more than 40 services involving instruction or assistance in backpacking, canyoneering, kayaking, custom golf club fitting and repair, snowboard and ski rental and repair, SCUBA training and certification, SCUBA boat charters, team sales, racquet stringing, and bicycle tune-up and repair.