Global Sports, Inc. Reports Record Second Quarter Fiscal 2000 Results, Net Sales Up 36% Sequentially, Cash Operating Expenses Increase Only 3%
KING OF PRUSSIA, PENNSYLVANIA, August 2, 2000 GLOBAL SPORTS, INC. (NASDAQ: GSPT), a leading developer and operator of e-commerce sporting goods businesses, announced today record operating results from continuing operations for the second quarter ended July 1, 2000. Importantly, the Company achieved sequential revenue growth of 36% over the first quarter of fiscal 2000, while cash operating expenses increased only 3%, leading to a narrower cash operating loss. The Company noted that incremental sales volume from three new relationships launched during the second quarter of fiscal 2000, Oshmans.com, Bluelight.com, and Broadband Sports, contributed to the Company’s solid sequential improvement. Global Sports pointed to the recent addition of major alliances with buy.com, FOXSPORTS.com, and Toysrus.com as continued evidence of its ability to efficiently grow revenues by establishing new partners. The quarter was also highlighted by enhanced working capital management and an improved financial position, as inventory increased at less than one third the rate of sales growth and the Company raised over $40 million of new capital.
Second Quarter Financial Results
Revenues from continuing operations for the second quarter ended July 1, 2000 were $7.8 million compared to no revenues from continuing operations for the same period in 1999 and revenues from continuing operations in the first quarter of fiscal 2000 of $5.7 million. The Company did not launch its e-commerce sporting goods business until the fourth quarter of fiscal 1999. The Company’s financial statements for the second quarter of fiscal 1999 reflect the Company’s historical businesses, which have been accounted for as discontinued operations. On a pro-forma basis, net loss from continuing operations for the quarter was $11.2 million, a 1% improvement from the first quarter of fiscal 2000. On a pro-forma basis, the net loss for the quarter was $0.54 per share, compared with a pro-forma net loss of $0.61 per share for the first quarter of fiscal 2000. Pro-forma net loss and pro-forma net loss per share exclude all non-cash charges, including stock-based compensation and depreciation and amortization expenses.
Gross profit for the second quarter of fiscal 2000 was $2.2 million and gross margin for the same period was 29.0%, compared to gross profit of $1.8 million and gross margin of 30.9% for the first quarter of fiscal 2000. The overall margin result was higher than external projections but reflected a modest sequential decline due to the seasonal importance of lower margin categories, such as golf and outdoors. Operating expenses excluding non-cash charges for the second quarter of fiscal 2000 were $13.7 million versus $13.3 million for the first quarter of fiscal 2000, an increase of only 3% compared to sequential sales growth of 36%. Operating expenses excluding non-cash charges for the second quarter primarily consisted of sales and marketing costs of $9.5 million, product development costs of $1.9 million, and general and administrative expenses of $2.3 million. This compares to $9.8 million, $1.6 million, and $1.9 million for sales and marketing, product development, and general and administrative expenses for the first quarter of fiscal 2000, respectively. Sales and marketing expenses include general distribution facility costs, promotional shipping, payroll and related expenses for personnel engaged in merchandising, buying, marketing, client services, fulfillment and customer service, credit card fees, partner revenue share, as well as advertising and media spending. Non-cash charges for the quarter totaled $4.4 million and included the charge related to the Company’s financings with SOFTBANK Capital Partners, SOFTBANK Capital Advisors Fund, and TMCT Ventures.
Michael G. Rubin, Chairman and CEO of Global Sports, commented on the Company’s financial results, stating, Global Sports achievements during the second quarter exemplify our business model at work. Our success stems from our ability to increase revenue by adding new high-traffic partners and leveraging our common infrastructure and inventory across our multiple partners, rather than increasing our marketing expenditures. The addition of three new partners during the second quarter, combined with our three new alliances announced during the past week, solidifies Global Sports leadership position within this industry and validates our business strategy.
Global Sports achieved many significant milestones since April 1, 2000. Highlights of these achievements include:
Partnerships and Alliances
- On July 31, 2000, the Company announced an agreement with Toysrus.com, a leading retailer of children’s products on the Internet, to develop a new youth sporting goods e-commerce site, Sportsrus.com. Slated to launch this fall as a channel on Toysrus.com, Sportsrus.com allows Toyrus.com to tap into the growing U.S. population of more than twenty million kids that participate in youth sports.
- On July 31, 2000, Global Sports announced that it formed a long-term strategic alliance with buy.com, a leading multi-category Internet superstore. Under the agreement, Global Sports will power the new sporting goods store on the flagship buy.com Web site.
- On July 26, 2000, the Company announced an exclusive long-term alliance with FOXSPORTS.com, the online sports division of News Corporation’s (NYSE: NWS) News Digital Media unit, whereby Global Sports will develop and operate the flagship store on FOXSPORTS.com and the 19 FOX Sports Net regional Web sites.
- June 15, 2000, Global Sports announced the formation of a strategic alliance with NetZero, Inc., a leading provider of free Internet services. Under the agreement, NetZero will create five customized, free ISP services that are uniquely branded for certain Global Sports retail partners: Dunham’s Sports, MC Sports, Oshman’s Sporting Goods, Sport Chalet, and The Athlete’s Foot.
- On April 4, 2000, the Company announced that it formed a strategic relationship with Broadband Sports in which Global Sports will become the exclusive e-commerce sporting goods provider for all of Broadband Sports properties. Broadband Sports will also provide unique athlete and team sports collectibles and memorabilia for distribution on Global Sports partners Web sites. In addition, Broadband Sports will utilize its extensive roster of over 350 athletes and sports personalities to create first-person content for Global Sports partners Web sites.
Strategic Financing and Sale of Historical Business
- On May 30, 2000, Global Sports announced that it had completed the sale of its Off Price & Action Sports Division to a group led by the Management of the Division. Global Sports received cash proceeds of $13.2 million at closing.
- On April 27, 2000, the Company announced that TMCT Ventures, SOFTBANK Capital Partners, and SOFTBANK Capital Advisors Fund agreed to acquire common stock of Global Sports for a total of $25 million in cash at $8 per common share. In addition, these investors have the right to acquire up to an additional $15.6 million of common stock at $10 per common share.
Web Sites News
- During the second quarter, Global Sports launched the sporting goods department of Bluelight.com, the exclusive e-commerce partner for Kmart, the online store for Oshman’s Sporting Goods, www.oshmans.com, and the initial phase of the Broadband Sports store.
- On May 9, 2000, TheSportsAuthority.com was named the #2 overall shopping site on the Internet in Shelly Taylor & Associates most recent study, Return to Sender. This international study looked at the success factors of online order fulfillment and post-transaction communication. TheSportsAuthority.com was bested only by Amazon, which according to the study, only squeaked to the top of the list.
Global Sports, Inc. (NASDAQ: GSPT) (www.globalsports.com) is a leading developer and operator of e-commerce sporting goods businesses. Global Sports develops and operates the e-commerce sporting goods businesses of specialty retailers, general merchandisers, Internet companies, and media companies under exclusive long-term agreements. The Company operates the e-commerce sporting goods businesses of www.bluelight.com the exclusive e-commerce partner for Kmart, www.broadbandsports.com and www.athletesdirect.com, www.buy.com, www.dunhamssports.com, store.foxsports.com, www.mcsports.com, www.oshmans.com, www.sportchalet.com, www.sportsrus.com, www.theathletesfoot.com, www.thesportauthority.com, and store.webmd.com.
Statements about the Company’s outlook and all other statements in this release other than historical facts are forward-looking statements. Since these statements involve risks and uncertainties, they are subject to change at any time and the Company’s actual results may differ materially from expected results. Many of the Company’s forward-looking statements are based upon certain assumptions, and there are inherent difficulties in predicting certain important factors that could impact these assumptions. These factors, as and when applicable, are discussed in the Company’s filings with the SEC.
Contact:
Media Contact:
Dana Stein Grosser
Director of Corporate Communications
Global Sports, Inc.
(610) 491-7000
grosserd@globalsports.com
Investor Contact: Jordan M. Copland
Executive Vice President and Chief Financial Officer
Global Sports, Inc.
(610) 491-7000
coplandj@globalsports.com
