Global Sports Reports Second Quarter Fiscal 2001 Results
GLOBAL SPORTS, INC. (NASDAQ: GSPT), a leading developer and operator of e-commerce sporting goods businesses, today announced operating results for the second quarter ended June 30, 2001.
Second Quarter Fiscal 2001 Financial Results
Net revenue was $17.0 million for the second quarter of fiscal 2001, which represents a 119% increase compared to net revenue of $7.8 million for the second quarter of fiscal 2000. Comparable store sales in this quarter for Web stores operated for more than twelve months increased by approximately 91%. Pro forma loss from continuing operations was $5.4 million for the second quarter of fiscal 2001, which represents a 52% improvement compared to a pro forma loss from continuing operations of $11.2 million for the second quarter of fiscal 2000. Pro forma loss from continuing operations per share was $0.17 for the second quarter of fiscal 2001 compared with a pro forma loss from continuing operations per share of $0.54 for the second quarter of fiscal 2000. Pro forma loss from continuing operations and pro forma loss from continuing operations per share exclude all non-cash charges, including stock-based compensation and depreciation and amortization expenses. The company reported cash, cash equivalents, and short-term investments of $63.6 million and shareholders’ equity of $101.9 million at the end of the second quarter of fiscal 2001. These amounts do not take into account the recently announced $30.0 million investment by a joint venture of Comcast Corporation and QVC which is expected to close by the end of August 2001.
Gross profit was $5.3 million and gross margin was 31.0% for the second quarter of fiscal 2001 compared to gross profit of $2.2 million and gross margin of 29.0% for the second quarter of fiscal 2000. Operating expenses excluding non-cash charges were $11.5 million for the second quarter of fiscal 2001 compared to $13.7 million for the second quarter of fiscal 2000, a decrease of approximately 17% on over a two-fold increase in sales. Operating expenses excluding non-cash charges for the second quarter of fiscal 2001 primarily consisted of sales and marketing expenses of $6.8 million, product development expenses of $2.1 million, and general and administrative expenses of $2.6 million. This compares to sales and marketing expenses of $9.5 million, product development expenses of $1.9 million, and general and administrative expenses of $2.3 million for the second quarter of fiscal 2000. Sales and marketing expenses include general distribution facility expenses, promotional shipping and handling, 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 second quarter of fiscal 2001 totaled $2.5 million compared to $4.4 million for the second quarter of fiscal 2000. These expenses included primarily stock-based compensation and depreciation and amortization expenses.
Fiscal Year and Third Quarter 2001 Outlook
The following forward-looking statements reflect Global Sports’ expectations as of July 25, 2001. Given the potential changes in general economic conditions and consumer spending, the emerging nature of e-commerce, and various other risk factors discussed below, actual results may differ materially. The company intends to continue its practice of not updating forward-looking statements until its next quarterly results announcement.
Fiscal 2001 Expectations
- Net revenue is expected to be approximately $100 million.
- Gross margin is expected to be between 31.5% and 32.0%.
- Cash operating expenses are expected to be between $51.5 and $52.0 million.
- Net interest income is expected to be approximately $2.5 million.
- Pro forma loss from continuing operations is expected to be between $17.0 million and $18.0 million.
- Pro forma loss from continuing operations per share is expected to be between $0.53 and $0.56.
- Cash, cash equivalents, and short-term investments are expected to be approximately $100 million at December 29, 2001 taking into account the strategic investment by a joint venture of Comcast Corporation and QVC, Inc.
Third Quarter 2001 Expectations
- Net revenue is expected to be between $17.5 million and $18.5 million.
- Gross margin is expected to be between 31.0% and 31.5%.
- Cash operating expenses are expected to be between $12.0 million and $12.5 million.
- Net interest income is expected to be between $400,000 and $450,000.
- Pro forma loss from continuing operations is expected to be between $6.0 million and $6.4 million.
- Pro forma loss from continuing operations per share is expected to be between $0.19 and $0.20.
- Cash, cash equivalents, and short-term investments are expected to be between $83.0 million and $87.0 million at September 29, 2001 taking into account the strategic investment by a joint venture of Comcast Corporation and QVC, Inc.
Michael G. Rubin, Chairman and CEO of Global Sports, commented on the company’s results this quarter, saying, “Our second quarter performance demonstrated excellent results on all fronts. We enjoyed tremendous top-line expansion driven by the addition of new partners and strong same-store sales. Comparing the second quarter of 2001 with the second quarter of 2000, we improved our gross margins, and we reduced our operating expenses not only as a percentage of sales but also in absolute dollars. Overall, our pro forma loss from continuing operations for the quarter was less than half the amount for the same period last year. Our balance sheet has also strengthened with $93.6 million in cash on a pro forma basis as of June 30, 2001 taking into account the $30 million we expect to receive from Comcast Corporation and QVC, Inc. In addition, we significantly reduced our liabilities while increasing inventory only slightly despite over a 100% increase in sales. These results clearly demonstrate the scalability of our business and our momentum in the marketplace. With a strong first half under our belt, we are confident about our prospects for the remainder of the year, including continued expectations to report pro forma profitability for the fourth quarter, and I am excited to again provide an improved outlook for the full year.”
Global Sports achieved many important milestones since March 31, 2001. Highlights of these achievements include:
Strategic Investment
- On July 23, 2001, the Company announced an agreement with a joint venture of Comcast Corporation and QVC, Inc. to increase their strategic investment in Global Sports by purchasing an aggregate of 4,000,000 common shares, including 3,000,000 new shares from the company and 1,000,000 shares from the company’s Chairman, President and CEO, Michael Rubin, at a price of $10.00 per share. This transaction, which is subject to certain customary closing conditions, is expected to close by the end of August 2001.
Partnerships and Alliances
- On April 10, 2001, the Company announced an agreement with Dick’s Sporting Goods to develop and operate the new www.dickssportinggoods.com Web site. The new www.dickssportinggoods.com launched in April.
- On May 9, the Company announced an agreement with Ignite Sports Media to develop and operate the e-commerce sporting goods stores for two NFL teams, the Carolina Panthers and the Detroit Lions. The new stores launched in the second quarter.
- On June 28, the Company announced an alliance with Gart Sports to develop and operate the e-commerce sports goods stores for Gart Sports’ three retail brands – Gart Sports, Sportmart, and Oshman’s Sporting Goods. The Company has operated the e-commerce store at www.oshmans.com since November 1999, and the www.gartsports.com and www.sportmart.com e-commerce stores are expected to launch in the third quarter of 2001.
- On July 3, the Company announced an alliance with BLADES Board & Skate, a leading action sports enthusiast retail chain, to develop and operate the e-commerce sporting goods store at www.blades.com. The site launched in the third quarter.
- On July 10, the Company announced an agreement with Olympia Sports, a service and family oriented retail sporting goods company, to develop and operate its new e-commerce store. The site is expected to launch in the third quarter.
- On July 16, the Company announced the enhancement and extension of their existing e-commerce agreement with The Sports Authority as well as the expansion of their relationship to include catalogue and kiosk related services. The agreement between The Sports Authority and Global Sports has been streamlined by replacing their previous joint venture with a simplified revenue sharing arrangement.
Awards and Honors
- On May 10, 2001, the Company was named the 2000 Call Center of the Year for Online Businesses by Call Center Magazine.
- On May 16, the Company was named the 2000 Top Business-to-Business Sports Internet Company of the Year by Street & Smith’s SportsBusiness Journal.
Second Quarter Conference Call
A conference call to discuss Global Sports’ second quarter 2001 financial results will be held at 4:45 p.m. EDT on Wednesday, July 25, 2001. For access to the conference call, call 1-888-390-8568 by 4:30 p.m. EDT. The password is “Global” and the leader name is “Michael Rubin.” A tape recording of the conference call will be available, starting one hour after completion of the call, until the end of business August 3, 2001. To access the recording, call 1-888-562-6504.
A live Webcast of the conference call will also be available at www.globalsports.com or www.streetevents.com. A replay of the Webcast will be available for a limited time.
About Global Sports
Global Sports, Inc. (NASDAQ: GSPT) (www.globalsports.com) is a leading developer and operator of e-commerce sporting goods businesses.
Forward-Looking Statements
All statements made in this release and to be made in Global’s second quarter 2001 conference call, including those in the recordings and live audio of the call, other than statements of historical fact, are forward-looking statements. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “will”, “guidance”, and similar expressions typically are used to identify forward-looking statements. Those forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business of Global Sports and the industry and markets in which the company operates. Those statements are not guarantees of future performance and involve risks, uncertainties and assumptions which will be difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied by those forward-looking statements. Factors which may affect Global Sports’ business, financial condition and operating results include the effects of changes in the economy, consumer spending, the stock market and the sporting goods industry generally, changes affecting the Internet and e-commerce, the ability of the company to maintain relationships with strategic partners and suppliers, the ability of the company to timely and successfully develop, maintain and protect its technology and product and service offerings and execute operationally, the ability of the company to attract and retain qualified personnel and the ability of the company to successfully integrate its recent acquisition of Fogdog, Inc. More information about potential factors that could affect Global Sports can be found in its most recent Form 10-K, Form 10-Q and other reports and statements filed by Global Sports with the Securities and Exchange Commission. Global Sports expressly disclaims any intent or obligation to update those forward-looking statements except as otherwise specifically stated by Global Sports.
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Click here for Second Quarter 2001 Financial Statements (.pdf)
Contact:
Investor Contact:
Jordan M. Copland
Executive Vice President and Chief Financial Officer
Global Sports, Inc.
(610) 491-7000
coplandj@globalsports.com
Media Contact:
Patricia Henderson
Corporate Communications
Global Sports, Inc.
(610) 491-7000
hendersonp@globalsports.com
