Sport Chalet shares soar 23% as it gets new financing
The depressed shares of Sport Chalet Inc. shot up 23% on Thursday after the La Cañada Flintridge retailer said it had obtained new financing and would consider closing some of its 55 stores.
The sporting-goods chain has been hit hard by the economic downturn, recording losses in each of the last three fiscal years as well as the current year’s first quarter, which ended in June.
But in an apparent vote of confidence in the company, Bank of America Corp. has agreed to give Sport Chalet a four-year, $65-million line of credit, replacing a $45-million credit line that also was with BofA.
A lower interest rate and other improved terms of the new financing will increase Sport Chalet’s financial flexibility, the company said in announcing the agreement Thursday.
The news sent the retailer’s Class A stock up 36 cents to $1.94, well above its low of 16 cents reached in March 2009, but still down sharply from more than $11 in 2007.
Founded in 1959, Sport Chalet has stores in California, Arizona, Nevada and Utah, a region that includes some of the nation’s worst-hit housing markets. The chain’s premium snowboards, camping gear and athletic apparel have been a tough sell in recent years, even at reduced prices.
Since the recession began, the company has been renegotiating rent on existing stores, deferring store openings, working to improve inventory management and reducing other expenses.
“We’ve just gotten so much more efficient and tougher,” Chief Executive Craig Levra said in an interview. “There’s no wind on our back; we have to row.”
Now, Levra said, the company will aggressively examine the possibility of closing underperforming stores and replacing them with better sites.
“The economy’s a disaster,” he said. “California, Arizona and Nevada are a mess. The good news is even though we’re geographically focused there and we’re feeling the brunt of it, our teams have really shown an unending resolve to fight through this.”
In agreeing to provide a new line of credit, Bank of America seemed to endorse Levra’s optimistic view.
“Based on the progress that has been made over the past two years, we are happy to reaffirm our commitment to Sport Chalet and help the company move forward in implementing the next phase of its business strategy,” David Darnell, president of global commercial banking at Bank of America, said in a statement released by Sport Chalet.
