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Golfsmith Announces Fourth Quarter and Fiscal 2008 Results

AUSTIN, Texas—(BUSINESS WIRE)—Golfsmith International Holdings, Inc., (NASDAQ: GOLF) today announced financial results for the fourth quarter and fiscal 2008 ended January 3, 2009.

Fourth Quarter Highlights:

Net revenues decreased 14.1 percent to $67.8 million for the fourth quarter of fiscal 2008 compared to net revenues of $79.0 million for the same period in the prior year. Net revenues reflect a 17.3 percent decrease in comparable store sales and a 23.1 percent decrease in net revenues from its direct channel. Comparable store sales are calculated on a 13 week basis for both quarters presented.

Operating loss totaled $6.6 million in the fourth quarter of fiscal 2008 compared to a loss of $45.6 million for the same period last year. Fiscal 2007 operating loss included a $43.0 million non-cash impairment charge to write-off goodwill and reduce the net book value of other long-lived assets related to the decline of the Company’s stock price and market capitalization. Excluding these non-cash charges, operating loss in fourth quarter of fiscal 2007 would have been $2.6 million. Also, during the fourth quarter of fiscal 2008, the Company performed an analysis of advertising costs related to its co-operative vendor programs resulting in the reclassification of $2.2 million of expense from cost of goods sold to selling, general and administrative. This resulted in a decrease in gross profit of 320 basis points.

Net loss in the fourth quarter of fiscal 2008 totaled $6.5 million, or a net loss per diluted share of $0.40. This compared to a net loss of $46.7 million or, excluding the $43.0 million non-cash impairment charge, a net loss of $3.7 million or $0.23 per diluted share for the fourth quarter of fiscal 2007.

“Martin Hanaka, chairman and chief executive officer commented, “Our fourth quarter results reflect ongoing challenges in the economic environment. Looking ahead to 2009, the retail environment remains difficult and we will continue to carefully control expenses, manage inventory levels and focus on cash preservation. We are also continuing our efforts to institute operational improvements, increase store productivity and enhance profitability, positioning our Company for long-term sales and earnings growth.”

Fiscal 2008 Highlights:

Net revenues decreased 2.4 percent to $378.8 million in fiscal 2008 compared to net revenues of $388.2 million in fiscal 2007. Net revenues reflect a 6.3 percent decrease in comparable store sales, and a 13.1 percent decrease in net revenues from the Company’s direct channel. Total net revenues represent 53 weeks for 2008 compared to 52 weeks in 2007. Comparable store sales are calculated on a 52 week basis in both fiscal years.

The Company reported operating income of $2.3 million in fiscal 2008. This compares to an operating loss of $36.9 million in fiscal 2007, including the $43.0 million non-cash impairment charge to goodwill and other long-lived assets. Excluding the impairment charge, operating income was $6.1 million in fiscal 2007.

The Company reported a net loss for fiscal 2008 of $0.5 million, or a net loss per diluted share of $0.03. This compares to a net loss of $40.8 million in fiscal 2007. Excluding the impairment charge, net income was $2.2 million or $0.14 per diluted share.

As of January 3, 2009, total inventory was $90.5 million compared to $98.5 million at December 29, 2007, and average store inventory declined approximately 8%.

Outlook:

Until there is greater long-term visibility on the consumer environment, the Company will limit earnings guidance to the upcoming quarter. For the first quarter of fiscal 2009, same-store sales are expected to decline in the mid to high teens and we expect a slight improvement in gross margin. Operating results for the first quarter of fiscal 2008 included a $1.8 million charge, or $0.11 cents per share, related to restructuring costs, severance and search fees associated with organizational changes made during the quarter.

Conference Call Information

The company will host a conference call today at 4:30 p.m. (eastern time) to discuss the fourth quarter and fiscal 2008 financial results. The call will be simulcast over the Internet at https://investors.golfsmith.com. A replay will be available for 30 days after the call at the aforementioned website. Telephone replays can be accessed for seven days following the call by dialing 888-286-8010 (U.S.) or 617-801-6888 (international) and entering passcode 6428954.

About Golfsmith

Golfsmith International Holdings, Inc., (NASDAQ: GOLF) is a 40-year-old specialty retailer of golf and tennis equipment, apparel and accessories. The company operates as an integrated multi-channel retailer, offering its guests the convenience of shopping in its 73 stores across the United States, through its Internet site at www.golfsmith.com and from its assortment of catalogs. Golfsmith offers an extensive product selection that features premier branded merchandise, as well as its proprietary products, clubmaking components and pre-owned clubs.

Cautionary Language

This press release contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about the company’s beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend,” or similar expressions. Forward-looking statements are not guarantees of performance. These statements are based on management’s beliefs and assumptions, which in turn are based in part on currently available information and in part on management’s estimates and projections of future events and conditions. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for the products, the introduction of new product offerings, store opening costs, the ability to lease new sites on a timely basis, expected pricing levels, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement. Many of these factors are beyond the company’s ability to control or predict. Such factors include, but are not limited to the Risk Factors set forth in Item 1A. Risk Factors in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2008.

The company believes its forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and the company undertakes no obligation to update publicly any of them in light of new information or future events.

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