Sport Chalet pursues its first annual profit since 2007

If you’re an outdoors enthusiast or weekend warrior, chances are you’re a fan of Sport Chalet Inc. If you’re an investor, well, that’s another story.

Living up to its moniker, “the Experts,” Sport Chalet staffs its stores with marathon runners, professional triathletes, experienced divers, snowboarders and skiers.

The goal is to present athletes with a top-notch shopping experience they won’t get in big-box or discount retailers — or on Amazon.com, which has been swallowing up business from brick-and-mortar retailers for years.

Sport Chalet stores offer clinics by experts in many fields. Some have dive pools for scuba training.

“Our total focus is improving the performance of the athletes we come in contact with,” said Craig Levra, Sport Chalet’s chairman and chief executive. “We have experts that can explain the products. We teach you how to scuba dive. We can rent you snow gear, teach you to ski or snowboard.... So many retailers just put stuff out there [and hope it sells].”

It’s a novel concept, but there’s one problem: Sport Chalet hasn’t posted an annual profit since 2007. Its stock traded as low as 68 cents a share last year.

The company was hammered by the Great Recession, which took a heavy toll in the West, where Sport Chalet outlets are located. Amid the biggest financial downturn in a generation, consumers slashed discretionary spending, letting their snowboards, bicycles, dive tanks and tennis rackets age a season or two longer than ordinary.

“We really took the hit very, very hard,” Levra said. “It took us a while to recover.”

Its stock is thinly traded, one reason why it’s listed on the second-tier Nasdaq Global Market.

The latest

Sport Chalet has started equipping some of its sales staff with iPads, enabling them to show customers merchandise available at other stores or online, but not displayed at their store.

This is important at smaller stores, including the outlet it opened last year in the Figat7th shopping center in downtown Los Angeles.

That store’s 27,000 square feet of space is much smaller than many of its other stores. So sales staff use iPads instead of display models, allowing the store to take advantage of limited space.

Accomplishments

Sport Chalet started in 1959 when founder Norbert Olberz and his wife, Irene, bought a small ski and tennis shop in La Flintridge. During the first year, the couple slept in the back of the shop, taking showers at night with a garden hose.

They transformed the company into a successful regional chain. Today, Sport Chalet operates 51 stores in California, Arizona, Nevada and Utah.

Today, there are signs the company could be turning things around.

Its fiscal third quarter, ended Dec. 29, was its most profitable quarter in seven years. The company reported net income of $1.5 million, compared with a net loss of $1.9 million a year earlier.

“The third quarter is a good illustration of steps we have taken to improve our store performance and reduce our cost structure,” Levra said.

Challenges

Despite its third-quarter profit, Sport Chalet is on pace to report an annual loss for the seventh consecutive year. The company said it had lost $4.4 million in the first nine months of its current fiscal year, more than four times the $1 million it lost in the same period of its 2013 fiscal year.

The company is on a cost-cutting mission, closing underperforming stores, renegotiating leases, even reducing the amount of money it spends on cash-register tape, Levra said.

He wouldn’t say when the company would report an annual profit.

“We’re taking all the right steps to get there, to be laser-focused on a better performance of our business,” he said. “If you look at the progress we made in our third quarter, it’s evident that a lot of what we’re doing is working.”

Analyst views

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The company: Sport Chalet Inc.

Headquarters: La Cañada Flintridge

Ticker: SPCHA and SPCHB

Employees: 3,000

Leadership: Craig Levra, chairman and chief executive

Fiscal 2013 revenue: $361 million

Fiscal 2013 net loss: $3.3 million

Stock price: As of Friday, $1.24 for Class A and $1.21 for Class B

52-week range: 68 cents to $2.44 for Class A; $1.06 to $2.24 for Class B

Dividend: None

P/E ratio: Not applicable

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