Golfsmith International Holdings CEO Discusses Q1 2011 Results - Earnings Call Transcript

Golfsmith International Holdings, Inc. ( GOLF)

Q1 2011 Earnings Call

April 28, 2011 9:00 am ET

Executives

Jean Fontana – Investor Relations, ICR, Inc.

Martin E. Hanaka – Chairman and Chief Executive Officer

Sue E. Gove – Executive Vice President, Chief Operating Officer and Chief Financial Officer

Analysts

Jennifer Davis – Lazard Capital Markets

Presentation

Operator

Good day, everyone, and welcome to the Golfsmith International Holdings, Inc. First Quarter 2011 Earnings Conference Call. Just a reminder today’s call is being recorded.

And at this time, I would like to turn things over to Ms. Jean Fontana. Please go ahead, ma’am.

Jean Fontana

Good morning, everyone, thank you for joining us today to discuss Golfsmith’s first quarter 2011 earnings results. As a reminder, our presentation includes and responses to various questions may include forward-looking statements about the company’s financial results and about future plans and objectives.

Any such statements are subject to risks and uncertainties, which could cause the actual results and the implementation of the company’s plans and operations to vary materially. These risks are discussed in the company’s annual report on Form 10-K filed with the SEC.

We issued a press release this morning. If you have not received a copy, you can find it on our website or by calling Investor Relations at 203-682-8200.

Presenting on the call today we have Golfsmith’s Chairman and CEO, Martin Hanaka as well as Chief Financial Officer and Chief Operating Officer, Sue Gove.

With that, I’ll turn the call over to Marty.

Martin E. Hanaka

Thank you very much and good morning everybody. With me in Austin today are Anna Jobe, our Controller; our General Counsel, Jim Eliasberg; and [Jeff Laforce]. Sue Gove is joining us remotely.

We are really excited on the momentum we’re building at Golfsmith from the fourth quarter and the first quarter 2011. Q1 represents our best year-over-year quarterly performance in almost six years. The initiatives that our team has put in place such as really focusing on the Web business, improving our selling culture and shifting our mix into apparel are really beginning the show results.

The industry consolidation and competitor closings are also a net positive for us. So hopefully that will continue. We think it will come to least into Q3, but it looks like business is stabilizing around the country too. Not only are we seeing strong sales across all of our channels, but also continue to gain market share within the golf industry. At least for the first two months we have double-digit share gains both in dollars and units according to Golf Datatech.

Our direct business was up 20.7 and what’s really encouraging is our Web business was up 30.3%, so excited on that trend again on top of 40% in Q4. We benefited from technological advancements in equipment, some new store openings. In fact we opened two and have six new stores over the last 12 months. We opened both in the town of Florida and St. Louis. And I’m pleased to announce today that our third store will open in June in Tysons Corner, Virginia.

Our signature club-fitting has really worked out. Our Play Better Guarantee is producing double-digit results again and again, and we are very pleased with the progress there.

So, overall, very pleased with the first quarter results and look forward to building on this momentum through the upcoming year and into Q2. And I can tell you, April is very consistent with our last two quarters combine, which are roughly 10% comp increases.

So the trends continue to be strong. We think we will continue to take market share. We see rounds played were up, real absolute numbers of rounds played in January and February, we are anxious to see March. But if that trend continues, the markets expanding and with the economy improving some what, we think that bodes well for the balance of 2011.

There is lot of new technology out there as I mentioned, there are some great club introductions starting with TaylorMade R11, Callaway’s RAZR product has obviously been very strong as well and as the Titleist D2 product. In fact clubs had its strongest quarter in a long time and outpaced the house. Customers are purchasing higher priced goods, 399 drivers, full price and that help raise our AOV by 6%.

We are dedicating more floor space to apparel. In fact we just completed a conversion of all of our apparel floors to a new fixed ring, which took us three years to do that’s going be behind us. And shop lines in total is almost 19% of our business, up from 15% a few years ago with a long-term goal to get to 25%. But those sales continue to be very strong and encouraging for us going forward. And proprietary brands exceeded 10% of our business, another key initiative.

Sue is going to give you more detail on the numbers but three things that we think are really going to help us into the balance of the year; we continue to aggressively build the Web business, continue to invest in proprietary to differentiate us, shifting space and other resources to apparel and footwear. And if we can continue to calculate on this great club trend, which looks very, very strong right now and our people are very excited about what’s coming in May and June. We think 2011 will definitely be the year we return to profitability.

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