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Sport Chalet Reports First Quarter Fiscal 2014 Results



Sport Chalet Reports First Quarter Fiscal 2014 Results

                  - Comparable Store Sales Decrease of 0.7%

          - Company Expands and Extends Bank Credit Facility to 2018

            - Next Generation Store Opens in Downtown Los Angeles

                    - Implements Operational Improvements

LOS ANGELES, Aug. 14, 2013 (GLOBE NEWSWIRE) -- Sport Chalet, Inc.
(Nasdaq:SPCHA) (Nasdaq:SPCHB), a premier, full service specialty sporting
goods retailer, today announced its financial results for the first quarter
ended June 30, 2013.

First Quarter 2014 Results

Sales decreased 2.8% to $81.5 million for the first quarter of 2014 from $83.8
million in the same period last year. Sales were lower primarily due to a
sales decrease of $1.1 million from the closure of two underperforming stores,
a 31.0% sales decrease in its Team Sales Division from the departure of sales
representatives, and a decrease in comparable store sales. The declines were
offset by a 37.6% increase in online sales. The Company has hired new sales
reps for Team Sales, and the Division's dedicated website has been delivering
promising results following an upgrade implemented last quarter.

Comparable store sales decreased 0.7% for the first quarter ended June 30,
2013 compared to the same period of last year, reflecting a
weaker-than-anticipated retail sales environment. In response, Sport Chalet
increased its promotional activity to stimulate sales. The promotions had an
impact on gross margin, which decreased to 26.3% from 27.9% in the first
quarter of last year.

Selling, general and administrative expenses as a percent of sales increased
to 26.5% from 24.7% in the first quarter of last year, primarily due to
increases in advertising, investments to support the growth of the online
business, and labor-related expenses.

The Company's net loss for the first quarter of 2014 was $2.8 million, or
$0.20 per diluted share, compared to net income of $0.1 million, or $0.01 per
diluted share, in the first quarter of last year.

On June 30, 2013, the Company's bank credit facility had a borrowing capacity
of $65.0 million, of which the Company utilized $56.2 million (including a
letter of credit of $4.5 million) and had $8.8 million in availability, $2.3
million above the availability requirement of $6.5 million. The amount of
availability fluctuates due to seasonal changes in sales and inventory
purchases throughout the year.

Expansion and Extension of Bank Credit Facility

On August 14, 2013, the Company amended its credit facility with its existing
bank, Bank of America, N.A., increasing its previous $65.0 million credit
facility (which had a seasonal increase to $70.0 million from September 1 to
December 31 of each year), which was due to expire in October 2014, to a $75.0
million credit facility. The expanded credit facility allows the Company to
borrow on more favorable terms and conditions with an increase in
availability, a reduction in interest rates and an extended expiration date to
August 2018.

Launch of Next Generation Store

On June 28, 2013, Sport Chalet opened its next generation store in Downtown
Los Angeles at FIGat7th, a premier shopping and dining destination. The
smaller store format (27,000 sq. ft. compared to the Company's typical 42,000
sq. ft. format) showcases a modern store layout with moveable fixtures and
shelves, and incorporates many of Sport Chalet's strategic initiatives, such
as the use of mobile technology for in-store shopping, data-driven
customization of product mix to reflect local customers' needs, and improved
inventory management. Sport Chalet's FIGat7th store demonstrates that the
Company can build a dynamic, productive store in an urban setting, which opens
many new possibilities for geographic expansion.

Operational Improvements

The Company has taken a number of steps meant to reduce expenses and improve
inventory management. Through the closure of underperforming stores, selected
staff reductions, and the renegotiation of logistics and software contracts,
the Company has reduced its annualized operating expenses by approximately
$3.2 million. In addition, Sport Chalet is improving its inventory systems by
tailoring merchandise mix to meet the needs of local customers and
aggressively managing inventory at both the store and vendor levels. As a
result, the Company entered the second quarter with very little aged
inventory.

CEO Commentary

"Our first quarter sales were lower than expected, which was disappointing
following the positive momentum we experienced at the end of fiscal 2013,"
said Craig Levra, Chairman and Chief Executive Officer. "We are closely
monitoring the uneven retail environment and will continue to respond as
appropriate with promotional activities, including radio advertising and
Action Pass member outreach."

"We are making solid headway in implementing our recently announced strategic
initiatives, which are designed to drive sales by reinforcing the Sport Chalet
brand as the specialty sports retailer of choice. We have added new drop ship
vendors to our online store and are adding mobile devices in stores to give
customers access to the broadest selection of merchandise and the most
seamless shopping experience across all of our channels."

"We have taken significant costs out of our business and continue to evaluate
opportunities to reduce our cost structure in a targeted and prudent manner.
With our expanded, five-year $75.0 million credit facility, we have ample
resources to execute our plan. When our customers return in full-force, we
expect that the operating leverage we have built into our business model, and
the strategic initiatives we are implementing, will result in improved
financial performance."

Conference Call Info

The Company will be hosting a conference call and audio webcast, both open to
the public, today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to review
its financial results for the first quarter ended June 30, 2013. Investors
will have the opportunity to listen to the earnings conference call over the
internet through an audio webcast located at
http://www.media-server.com/m/p/amxt4suf. The conference call may also be
accessed by dialing (866) 700-6293 and entering passcode 29522581. A dial-in
replay of the call will be available approximately two hours after the
conference call through Midnight Pacific Time on Saturday, September 14, 2013
by dialing (888) 286-8010 and entering passcode 27219330.

About Sport Chalet, Inc.

Sport Chalet is a premier, full service specialty sporting goods retailer
featuring the industry's top sports brands in apparel, footwear, and sports
equipment. Founded in 1959 by Norbert Olberz, the company has 52 stores in
Arizona, California, Nevada and Utah; an online store at www.sportchalet.com;
a Team Sales Division; and offers more than 50 specialty services for the
sports enthusiast, including online same day delivery, climbing, backcountry
skiing, ski mountaineering, avalanche education, and mountain trekking
instruction, car rack installation, snowboard and ski rental and repair, Scuba
training and certification, Scuba boat charters, team sales, gait analysis,
baseball/softball glove steaming and lacing, racquet stringing, and bicycle
tune-up and repair at its store locations. For more information, visit Sport
Chalet at www.sportchalet.com.

Forward-Looking Statements

Except for historical information contained herein, the statements in this
release are forward- looking and made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve known and unknown risks and uncertainties that may cause
the Company's actual results in future periods to differ materially from
forecasted results. Those risks include, among other things, the specific
forward looking statements in this release and the risks associated with each,
the negative effect of the economic downturn on the Company's sales,
limitations on borrowing under the Company's bank credit facility, the
Company's ability to control operating expenses and costs, the competitive
environment of the sporting goods industry in general and in the Company's
specific market areas, inflation, the challenge of maintaining its competitive
position, the Company's ability to manage the growth of its Team Sales
Division and online business, the Company's ability to regain or subsequently
maintain compliance with the requirements for continued listing of its Class B
Common Stock, changes in costs of goods and services, and the weather and
economic conditions in general and in specific market areas. These and other
risks are more fully described in the Company's filings with the Securities
and Exchange Commission.

Sport Chalet, Inc.
                                                                 
Consolidated Statements of Operations
                                                                 
                                                13 weeks ended 
                                               June 30, 2013    July 1, 2012
                                               (in thousands, except per share
                                               amounts)
Net sales                                       $ 81,525         $ 83,849
Cost of goods sold, buying and occupancy costs  60,060           60,481
Gross profit                                    21,465           23,368
                                                                 
Selling, general and administrative expenses    21,604           20,738
Depreciation and amortization                   2,166            2,069
(Loss) income from operations                   (2,305)          561
                                                                 
Interest expense                                541              458
Net (loss) income                               $ (2,846)        $ 103
                                                                 
(Loss) earnings per share:                                       
Basic                                           $ (0.20)         $ 0.01
Diluted                                         $ (0.20)         $ 0.01
                                                                 
Weighted average number of common                                
shares outstanding:
Basic                                           14,190           14,190
Diluted                                         14,190           14,199

 
Sport Chalet, Inc.
                                                              
Consolidated Balance Sheets
                                                              
                                          June 30,           March 31,
                                          2013               2013
                                          (Unaudited)         
Assets                                    (in thousands, except share amounts)
Current assets:                                               
Cash and cash equivalents                  $ 4,155            $ 3,775
Accounts receivable, net                   5,687              5,169
Merchandise inventories                    109,147            104,255
Prepaid expenses and other current        3,853               1,830
assets 
Total current assets                       122,842            115,029
                                                              
Fixed assets, net                          18,168             18,338
Total assets                               $ 141,010          $ 133,367
                                                              
Liabilities and stockholders' equity                          
Current liabilities:                                          
Accounts payable                           $ 37,707           $ 33,512
Loan payable to bank                       51,702             46,324
Salaries and wages payable                 4,183              3,367
Other accrued expenses                     20,362             18,839
Total current liabilities                  113,954            102,042
                                                              
Deferred rent                              14,597             16,075
Commitments and contingencies                                 
                                                              
Stockholders' equity:                                         
Preferred stock, $.01 par value:                              
Authorized shares – 2,000,000                                 
Issued and outstanding shares – none       --                 -- 
Class A Common Stock, $.01 par value:                         
Authorized shares – 46,000,000                                
Issued and outstanding shares –                               
12,414,490 at
June 30, 2013 and March 31, 2013           124                124
Class B Common Stock, $.01 par value:                         
Authorized shares – 2,000,000                                 
Issued and outstanding shares – 1,775,821                     
at
June 30, 2013 and March 31, 2013           18                 18
Additional paid-in capital                 37,373             37,318
Accumulated deficit                        (25,056)           (22,210)
Total stockholders' equity                 12,459             15,250
Total liabilities and stockholders'        $ 141,010          $ 133,367
equity 

                                                                   
Sport Chalet, Inc.                                                 
                                                                   
Consolidated Statements of Cash Flows                              
                                                                   
                                                     13 weeks ended 
                                                    June 30, 2013 July 1, 2012
                                                    (in thousands)
Operating activities                                               
Net (loss) income                                    $ (2,846)     $ 103
Adjustments to reconcile net (loss) income to net                  
cash (used in) provided by operating activities:
Depreciation and amortization                        2,166         2,069
Loss on disposal of property and equipment           --            (11)
Share-based compensation                             55            62
Changes in operating assets and liabilities:                       
Accounts receivable                                  (518)         (1,997)
Merchandise inventories                              (4,891)       (8,612)
Prepaid expenses and other current assets            (2,023)       109
Accounts payable                                     4,688         11,109
Salaries and wages payable                           816           1,146
Other accrued expenses                               1,523         (586)
Deferred rent                                        (1,478)       (716)
Net cash (used in) provided by operating             (2,508)       2,676
activities 
                                                                   
Investing activities                                               
Purchase of fixed assets                             (2,490)       (940)
Proceeds from sale of assets                         --            11
Net cash used in investing activities                (2,490)       (929)
                                                                   
Financing activities                                               
Proceeds from bank borrowing                         92,262        87,653
Repayment of bank borrowing                          (86,884)      (86,484)
Net cash provided by financing activities            5,378         1,169
                                                                   
Increase in cash and cash equivalents                380           2,916
Cash and cash equivalents at beginning of period     3,775         2,811
Cash and cash equivalents at end of period           $ 4,155       $ 5,727
                                                                   
Supplemental disclosure of cash flow information                   
Cash paid during the period for:                                   
Interest                                             $ 541         $ 433
                                                                   
Supplemental disclosure of non-cash investing and                  
financing activities
 Purchases of fixed assets on credit                 $ 903         $ 156

CONTACT: Howard Kaminsky, Chief Financial Officer
         investorrelations@sportchalet.com
         (818) 949-5300 ext. 5728

Sport Chalet
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