Golf Galaxy Announces First Quarter Fiscal 2007 Results

First Quarter Net Sales Increase 41 Percent; Net Income up 52 Percent 


EDEN PRAIRIE, Minn., June 20  /PRNewswire-FirstCall/ -- Golf Galaxy, Inc. (NASDAQ:GGXY), a leading golf specialty retailer, today announced its financial results for the first quarter ended May 27, 2006.

  (Logo: http://www.newscom.com/cgi-bin/prnh/20050728/CGTH081LOGO )

              First Quarter Performance Summary
                                                       Three Months Ended
  ($ in thousands, except per share amounts)      May 27, 2006  May 28, 2005

  Net sales                                           $82,517      $58,570
  Comparable store sales % increase(1)                   1.0%        10.5%
  Net income                                           $2,572       $1,693
  Diluted EPS                                           $0.22        $0.21
  Pro-Forma Diluted EPS(2)                                 NA        $0.15

  (1) A new or relocated store is included in comparable store results after
      it has been in operation for 12 full fiscal months following the month
      of the store's grand opening weekend, typically a store's 13th full
      month of operations.

  (2) Pro-forma results for the quarter ended May 28, 2005 is presented as
      if the company's initial public offering and the conversion of
      preferred stock into shares of common stock had occurred immediately
      prior to the beginning of the quarter. Pro-forma results are not a
      measure of performance presented in accordance with GAAP and are
      intended to be a supplement, but not as a substitute for net income or
      other financial data prepared in accordance with GAAP.  The company
      believes the use of pro-forma results provides a consistent measure of
      profitability as well as important supplemental information due to the
      significant increase in common shares outstanding resulting from the
      company's initial public offering and the conversion of the
      convertible preferred stock into shares of common stock as of Aug. 3,
      2005.



Net sales for the first quarter of fiscal 2007 increased 40.9 percent to $82.5 million, compared with $58.6 million for the same period of the prior year.  Comparable store sales increased 1.0 percent for the fiscal first quarter, compared to an increase of 10.5 percent for the first quarter of fiscal 2006.

The company reported net income for the first quarter of $2.6 million, or 22 cents per diluted share, compared to net income of $1.7 million, or 21 cents per diluted share, for the first quarter of fiscal 2006.  Giving effect to the conversion of preferred shares and the company's initial public offering as of the beginning of fiscal 2006, the company's pro-forma diluted earnings per share for the first quarter of fiscal 2006 would have been 15 cents.  A reconciliation of pro-forma net income and earnings per share is provided in a table that follows.

"Golf Galaxy achieved a 52 percent increase in net income quarter over quarter despite sales that were somewhat below our initial expectations," said Randy Zanatta, Golf Galaxy's president and chief executive officer.  "We grew total sales by $24 million and posted our thirteenth consecutive quarter of comparable store sales increases, against a strong 10.5 percent comp in the first quarter last year.  Additionally, we produced a solid year-over-year increase in our gross margin rate, largely due to the results from our strategic initiative to grow the services business -- our most profitable category."

Golf Galaxy opened eleven new stores during its fiscal first quarter, including its first stores in the Las Vegas, Pittsburgh, Syracuse, Oklahoma City and the New York City metro markets.  The company currently operates 61 stores in 24 states.  Golf Galaxy said it plans to open three to five additional stores during the current fiscal year, which ends March 3, 2007, for a total of 14 to 16 new stores in fiscal 2007.

  Company Outlook
  The company said that for the second quarter ending August 26, 2006:

  * Net sales are currently expected to be $98 million to $102 million, an
    increase of 40 percent to 46 percent over the second quarter of fiscal
    2006;

  * Comparable store sales are currently expected to increase 3 percent to
    5 percent; and

  * The company currently expects net income of $6.8 million to $7.2
    million, or 59 cents to 62 cents per diluted share (pending the final
    purchase price allocation of The GolfWorks acquisition and assuming 11.6
    million weighted average shares outstanding).



Based on current sales trends, Golf Galaxy today updated the guidance it provided May 22, 2006 for the fiscal year ending March 3, 2007, a 53-week period:

  * Net sales are currently expected to be $292 million to $300 million,
    compared with its prior estimate of $300 million to $310 million;

  * Comparable store sales are currently expected to increase 3 percent to
    5 percent, compared with the prior estimate of 5 percent to 7 percent;
    and

  * The company currently expects net income for fiscal 2007 of $6.8 million
    to $7.3 million, or 59 cents to 63 cents per diluted share (pending the
    final purchase price allocation of The GolfWorks acquisition and
    assuming 11.6 million weighted average shares outstanding), compared
    with its prior estimate of $7.5 million to $8.1 million, or 65 cents to
    70 cents per diluted share.



Golf Galaxy's guidance on net income for fiscal 2007 includes estimated expenses of approximately $900,000, or 8 cents per diluted share, from the expensing of stock options.

Conference Call and Webcast

Golf Galaxy will hold its first quarter earnings conference call at 10 a.m. CST today, June 20, 2006.  Interested parties may listen to the call by dialing 800-322-2803 or international 617-614-4925 (passcode: 46067434).  A live webcast will also be available on http://www.golfgalaxy.com/.  Interested parties should dial into the conference call or access the webcast approximately 10-15 minutes before the scheduled start time.  A replay will be available approximately one hour after the conference call concludes and will remain available through June 27.  The replay number is 888-286-8010 or international 617-801-6888 (passcode: 67015081).  The webcast will be archived on http://www.golfgalaxy.com/ for approximately one year.

About Golf Galaxy

Golf Galaxy, Inc., based in Eden Prairie, Minn., owns and operates golf specialty retail stores.  The company currently operates 61 stores in 24 states and an ecommerce website.  The company's Everything for the Game(R) merchandising strategy offers a comprehensive selection of competitively priced brand name golf equipment, accessories, apparel, golf services, and golf instruction by on-staff certified PGA professionals in a unique interactive store environment.  The GolfWorks, a leading direct marketer of golf club components, clubmaking tools and supplies, and technical information, is a wholly owned subsidiary of Golf Galaxy that sells direct to consumers via a catalog and the Internet at http://www.golfworks.com/.  For more information, visit http://www.golfgalaxy.com/

Cautionary Statement

This news release contains forward-looking statements about Golf Galaxy and readers should not place undue reliance on any forward-looking statements that are current only as of the date made.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those expressed in forward- looking statements.  The factors listed below, among others, could cause the company's actual financial performance to differ materially from that expressed in any forward-looking statement: A decline in the popularity of golf or golf-related products and services; limitations imposed by suppliers on the amount or variety of products; failure by suppliers to develop and introduce new products or if new products result in excessive close-outs of existing inventories; seasonal fluctuation in demand for products; weather conditions; ability to successfully implement growth plan; competition in the golf and sporting goods industry; a decline in discretionary spending; availability of adequate capital to fund growth; loss of key management; and the company's ability to successfully integrate acquired companies, including The GolfWorks.  Additional information concerning these and other factors that could cause actual results to differ materially from those in the forward- looking statements is included in the company's annual report on Form 10-K filed with the Securities and Exchange Commission on May 3, 2006.  The foregoing list should not be construed as exhaustive and Golf Galaxy disclaims any obligation subsequently to revise or update any previously made forward- looking statements, whether as a result of new information, future events or otherwise.

  GOLF GALAXY, INC.
  CONDENSED STATEMENTS OF OPERATIONS
  (In Thousands, Except Share and Per Share Amounts)

                                                   Three Months Ended
                                                       (Unaudited)
                                                  May 27,        May 28,
                                                    2006          2005

  Net sales                                       $82,517       $58,570
  Cost of sales                                    56,219        40,342
  Gross profit                                     26,298        18,228
  Operating expenses:
    Store operating                                15,817        10,932
    General and administrative                      4,482         3,102
    Preopening                                      1,648         1,310
  Income from operations                            4,351         2,884
  Interest income, net                                  8            15
  Income before income taxes                        4,359         2,899
  Income tax expense                               (1,787)       (1,206)
  Net income                                        2,572         1,693
  Less preferred stock dividends                        -          (998)
  Net income applicable to common shareholders     $2,572          $695
  Net income per share:
    Basic                                           $0.24         $0.37
    Diluted                                         $0.22         $0.21
  Weighted average number of shares
   outstanding:
    Basic                                      10,890,837     1,883,969
    Diluted                                    11,590,229     8,042,819



  GOLF GALAXY, INC.
  CONDENSED BALANCE SHEETS
  (In Thousands)
                                                May 27,    May 28,  Feb. 25,
                                                 2006       2005     2006
                                              Unaudited  Unaudited    (1)
  Assets
  Current Assets:
    Cash and cash equivalents                   $2,854     $9,159  $11,075
    Accounts receivable, net                    11,373      9,523    4,523
    Inventories, net                            69,856     44,492   45,278
    Other current assets                         5,881      3,729    5,196
                                                89,964     66,903   66,072

  Property and equipment, net                   38,884     23,856   35,218
  Goodwill & intangible assets, net              9,574         --       --
  Deferred tax assets & other                    5,342      2,719    5,257

  Total assets                                $143,764    $93,478 $106,547

  Liabilities and stockholders' equity
  Current liabilities:
    Accounts payable                           $47,487    $39,399  $23,224
    Accrued liabilities                         15,174     10,880   16,453
  Total current liabilities                     62,661     50,279   39,677

  Deferred rent credits and other               16,853     10,701   12,177
  Redeemable convertible preferred stock,
   including accumulated preferred stock
   dividends                                         -     49,739        -
  Stockholders' Equity (Deficit)                64,250    (17,241)  54,693

  Total Liabilities and Stockholders' Equity  $143,764    $93,478 $106,547

  (1) The Balance Sheet as of February 25, 2006 has been condensed from the
      audited financial statements.



  GOLF GALAXY, INC.
  CONDENSED STATEMENTS OF OPERATIONS -- UNAUDITED
  RECONCILIATION OF PRO-FORMA EARNINGS PER SHARE
  (In Thousands, Except Share and Per Share Amounts)

                                                                May 28, 2005
  Pro-Forma Information(1)
  Pro-forma net income applicable to common shareholders            $1,693
  Pro-forma net (loss) income per share:
    Basic                                                            $0.16
    Diluted                                                          $0.15
  Pro-forma weighted average number of shares outstanding:
    Basic                                                       10,636,436
    Diluted                                                     11,042,819

  Reconciliation of pro-forma information to GAAP
  Net income applicable to common shareholders (GAAP)                 $695
  Preferred stock dividends                                            998
  Net income applicable to common shareholders (Pro-forma)          $1,693
  Basic
  Weighted average number of shares outstanding (GAAP)           1,883,969
  Conversion of preferred stock to common                        5,752,467
  Weighted average additional shares issued in IPO               3,000,000
  Weighted average number of shares outstanding (Pro-forma)     10,636,436
  Diluted
  Weighted average number of shares outstanding (GAAP)           8,042,819
  Weighted average additional shares issued in IPO               3,000,000
  Weighted average number of shares outstanding (Pro-forma)     11,042,819


  (1) Pro-forma results for the quarter ended May 28, 2005 are presented as
      if the company's initial public offering and the conversion of
      preferred stock into shares of common stock had occurred immediately
      prior to the beginning of fiscal 2006. Pro-forma results are not a
      measure of performance presented in accordance with GAAP and are
      intended to be a supplement, but not as a substitute for net income or
      other financial data prepared in accordance with GAAP. The company
      believes the use of pro-forma results provides a consistent measure of
      profitability as well as important supplemental information due to the
      significant increase in common shares outstanding resulting from the
      company's initial public offering and the conversion of the
      convertible preferred stock into shares of common stock as of Aug. 3,
      2005.

  Contact:

  Investors:
   Rick Nordvold
   Golf Galaxy, Inc.
   952-941-8848

  Investors and media:
   Susan Eich
   For Golf Galaxy, Inc.
   612-285-4188


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DATASOURCE: Golf Galaxy, Inc.



CONTACT:  Investors: Rick Nordvold of Golf Galaxy, Inc., [phone];

or Investors and media: Susan Eich, [phone], for Golf Galaxy, Inc.



Web site:  http://www.golfgalaxy.com/

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