Sporting-Goods Retailers Warn
Weak Sales Will Hurt Results
By YUMIKO ONO
Staff Reporter of THE WALL STREET JOURNAL
Venator Group Inc. and Sports Authority Inc. said dismal sales of athletic shoes and clothes will sharply reduce their fiscal second-quarter results. Each company's shares tumbled 13% on the disclosures.
The share prices of the sporting-goods retailers are being watched closely on Wall Street, given that Venator has had a stock offer on the table to acquire Sports Authority since May, and last week a competing bidder emerged.
In May, Venator, which recently changed its name from Woolworth Corp., agreed to pay 0.8 share for each of Sports Authority's approximately 31.6 million shares outstanding. Based on Venator's closing price Tuesday, that offer has a value of about $461.4 million. But last Thursday, Gart Sports Co., Denver, outbid Venator with an unsolicited offer for 70% of Sports Authority at $20 a share, or about $442 million. The Gart offer values the entire company at about $630 million.
Venator, New York, wouldn't comment on whether it will revise its bid. Sports Authority, Fort Lauderdale, Fla., which said last week that it was evaluating Gart's bid, declined to comment further. Gart said its offer still stands, and is awaiting response from Sports Authority.
Tuesday, citing an oversupply of sports merchandise that forced it to discount prices heavily, Venator said it expects to report a net loss of five cents to 10 cents a diluted share for the quarter ending Aug. 1. Venator's net was expected to be 21 cents a share, according to a consensus estimate from First Call. Venator's stores include Foot Locker, Lady Foot Locker and Champs Sports. A year earlier, Venator, as Woolworth, reported income from continuing operations of $26 million, or 19 cents a share. That excluded a $207 million loss from discontinued operations, namely its well-known five-and-dime stores.
Sports Authority said earnings for the quarter ending July 26 are expected to be 12 cents to 14 cents a diluted share, off from analysts' estimates of 25 cents a share. The company's year-earlier earnings were $9.6 million, or 30 cents a share. The company said sales in stores open a year or more are expected to fall between 2% and 3% in the second quarter.
In composite New York Stock Exchange trading Tuesday, Venator's shares fell $2.75 to $18.25, a 52-week-low, and Sports Authority's fell $2.0625 to $14.50.
Both companies have struggled as more young consumers shun sneakers in favor of boots and leather shoes.
Venator, which is the nation's largest retailer of athletic shoes and clothes, has been struggling in an increasingly competitive market. Rivals, including Just for Feet Inc., are building some stores that are several times larger than many Foot Lockers. Others, such as Finish Line Inc., are capitalizing on the glut of sneakers by stocking up on closeout merchandise and selling it at a discount. Venator typically sells the latest model sneakers, at full price.
If the weak sales trends continue, Venator said, it expects its full-year earnings to be $1.10 to $1.20 a diluted share, below analysts' estimates of $1.72 a share. In the year ended Jan. 31, income from continued operations was $213 million, or $1.57 a diluted share.
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