Golfsmith International Holdings Inc. (GOLF, Financial) filed Quarterly Report for the period ended 2011-07-02.
Golfsmith International Holdings Inc. has a market cap of $59.6 million; its shares were traded at around $3.765 with and P/S ratio of 0.2.
Selling, general and administrative expenses. Selling, general and administrative expenses increased 5.5% to $35.6 million for the three months ended July 2, 2011 from $33.7 million for the three months ended July 3, 2010. As a percentage of net revenues, selling, general and administrative expenses decreased to 27.3% for the three months ended July 2, 2011 from 28.6% for the three months ended July 3, 2010. The increase in selling, general and administrative expenses over the previous year in absolute dollars primarily relates to the opening of four new stores as well as an increase in performance bonuses. This increase was partially offset by savings which resulted from our closure of three stores during 2010. The decline, as a percentage of revenue, over the same period in the previous year was primarily due to our ability to continue to leverage our fixed cost structure.
Interest expense, net. Interest expense, net consists of interest incurred on borrowings under our Credit Facility. For the three months ended July 2, 2011, net interest expense increased to $0.4 million from $0.3 million for the three months ended July 3, 2010. As a percentage of net revenues, interest expense increased to 0.3% for the three months ended July 2, 2011 as compared to 0.2% for the three months ended July 3, 2010. The increase in interest expense is primarily due to an increase in the average balance outstanding under our Credit Facility to facilitate store expansion and working capital requirements during our peak selling season.
Income tax expense. During the three-month periods ended July 2, 2011 and July 3, 2010, we recorded income tax expense of approximately $1.1 million and $0.9 million on pre-tax income of approximately $9.4 million and $7.1 million, respectively. Our provision for income taxes reflects an effective tax rate of approximately of 11.2% and 12.2% for the three months ended July 2, 2011 and July 3, 2010, respectively. The change in the effective tax rate, year over year, was driven primarily by a decrease in state taxes as a percentage of income before income taxes. The income tax expense for the periods differed from the amount which would have been recorded using the U.S. statutory tax rate of 34% due to a change in our valuation allowances. See Note 3 of the notes to Unaudited Condensed Consolidated Financial Statements included in this Form 10-Q for further discussion.
Net Revenues. Net revenues increased 14.0% to $211.7 million for the six months ended July 2, 2011 compared to $185.7 million for the six months ended July 3, 2010. The increase was primarily due to a $13.9 million increase in our store revenues and an increase of $3.7 million from our direct-to-consumer channel. Our comparable store revenues increased $13.9 million, or 9.3%, during fiscal 2011, as compared to fiscal 2010. In addition to an increase in sales among our existing retail locations, net revenues benefited from $8.4 million in sales associated with expansion of our store base and a 13.5% increase in direct-to-consumer revenue, driven by an increase in Internet sales of over 24%. Revenue also benefited from several key product launches among our newest line of drivers and from one of our fastest growth initiatives, custom fitting, leading to purchases of higher ticket clubs and irons. While consumer sentiment, competitive closings and expansion of our store base have, in our opinion, added momentum to revenue growth, golf participation and demand for our products has been negatively impacted by less than favorable weather conditions throughout much of the country. During the five months ended May 31, 2011, Golf rounds played, a leading indicator of golf participation tracked by Golf Datatech L.L.C., declined 6.3% compared to the same period in fiscal 2010. To better navigate these trends, our strategy has been to secure a greater share of the market and the loyalty of our customers. While we have been successful in increasing revenues during the first six months of fiscal 2011 there is no assurance that revenues will continue to grow through the balance of the year.
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Golfsmith International Holdings Inc. has a market cap of $59.6 million; its shares were traded at around $3.765 with and P/S ratio of 0.2.
Highlight of Business Operations:
Net Revenues. Net revenues increased 10.3 % to $130.2 million for the three months ended July 2, 2011 from $118.0 million for the three months ended July 3, 2010. The increase was primarily due to an $11.1 million increase in our store revenues and an increase of $1.5 million from our direct-to-consumer channel. Our comparable store revenues increased $6.7 million, or 7.0%, during fiscal 2011, as compared to fiscal 2010. In addition to an increase in sales among our existing retail locations, net revenues benefited from $4.4 million in sales associated with expansion of our store base and a 9.0% increase in direct-to-consumer revenue, driven by an increase in Internet sales of over 18%. Despite adverse weather conditions in some critical markets, the second quarter marked a continuation of sales momentum we experienced in the fourth quarter of 2010 and the first quarter of 2011. Sales in the second quarter were driven primarily by continued growth in new, higher priced drivers and iron sets along with solid increases in sales of shoes, apparel and premium golf balls.Selling, general and administrative expenses. Selling, general and administrative expenses increased 5.5% to $35.6 million for the three months ended July 2, 2011 from $33.7 million for the three months ended July 3, 2010. As a percentage of net revenues, selling, general and administrative expenses decreased to 27.3% for the three months ended July 2, 2011 from 28.6% for the three months ended July 3, 2010. The increase in selling, general and administrative expenses over the previous year in absolute dollars primarily relates to the opening of four new stores as well as an increase in performance bonuses. This increase was partially offset by savings which resulted from our closure of three stores during 2010. The decline, as a percentage of revenue, over the same period in the previous year was primarily due to our ability to continue to leverage our fixed cost structure.
Interest expense, net. Interest expense, net consists of interest incurred on borrowings under our Credit Facility. For the three months ended July 2, 2011, net interest expense increased to $0.4 million from $0.3 million for the three months ended July 3, 2010. As a percentage of net revenues, interest expense increased to 0.3% for the three months ended July 2, 2011 as compared to 0.2% for the three months ended July 3, 2010. The increase in interest expense is primarily due to an increase in the average balance outstanding under our Credit Facility to facilitate store expansion and working capital requirements during our peak selling season.
Income tax expense. During the three-month periods ended July 2, 2011 and July 3, 2010, we recorded income tax expense of approximately $1.1 million and $0.9 million on pre-tax income of approximately $9.4 million and $7.1 million, respectively. Our provision for income taxes reflects an effective tax rate of approximately of 11.2% and 12.2% for the three months ended July 2, 2011 and July 3, 2010, respectively. The change in the effective tax rate, year over year, was driven primarily by a decrease in state taxes as a percentage of income before income taxes. The income tax expense for the periods differed from the amount which would have been recorded using the U.S. statutory tax rate of 34% due to a change in our valuation allowances. See Note 3 of the notes to Unaudited Condensed Consolidated Financial Statements included in this Form 10-Q for further discussion.
Net Revenues. Net revenues increased 14.0% to $211.7 million for the six months ended July 2, 2011 compared to $185.7 million for the six months ended July 3, 2010. The increase was primarily due to a $13.9 million increase in our store revenues and an increase of $3.7 million from our direct-to-consumer channel. Our comparable store revenues increased $13.9 million, or 9.3%, during fiscal 2011, as compared to fiscal 2010. In addition to an increase in sales among our existing retail locations, net revenues benefited from $8.4 million in sales associated with expansion of our store base and a 13.5% increase in direct-to-consumer revenue, driven by an increase in Internet sales of over 24%. Revenue also benefited from several key product launches among our newest line of drivers and from one of our fastest growth initiatives, custom fitting, leading to purchases of higher ticket clubs and irons. While consumer sentiment, competitive closings and expansion of our store base have, in our opinion, added momentum to revenue growth, golf participation and demand for our products has been negatively impacted by less than favorable weather conditions throughout much of the country. During the five months ended May 31, 2011, Golf rounds played, a leading indicator of golf participation tracked by Golf Datatech L.L.C., declined 6.3% compared to the same period in fiscal 2010. To better navigate these trends, our strategy has been to secure a greater share of the market and the loyalty of our customers. While we have been successful in increasing revenues during the first six months of fiscal 2011 there is no assurance that revenues will continue to grow through the balance of the year.
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