Golf Galaxy Announces Third Quarter Fiscal 2006 Results

Third Quarter Net Sales Increase More Than 56 Percent; Comparable Store Sales Up 6.7 Percent 


EDEN PRAIRIE, Minn., Dec. 20  /PRNewswire-FirstCall/ -- 

                    Third-Quarter Performance Summary

                                           Three Months Ended
  ($ in thousands,                                          Nov. 27, 2004
   except per share amounts) Nov. 26, 2005  Nov. 27, 2004   (Pro-Forma)(1)

  Net sales                       $31,800      $20,281        $20,281
  Comparable store sales
   % increase (2)                     6.7%         9.9%           9.9%
  Net (loss) income               ($1,609)       $3,351       ($1,683)
  Diluted EPS                      ($0.15)        $0.43        ($0.16)


  (1) Pro-forma results for the quarter ended Nov. 27, 2004 exclude an
      after-tax gain of $5.0 million realized on the sale of the company's
      equity investment in Golf Town Canada Inc. stock. In addition, the
      pro-forma information 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.
  (2) 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.



Golf Galaxy, Inc. (NASDAQ:GGXY), a leading golf specialty retailer, today announced its financial results for the third quarter ended Nov. 26, 2005.

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Net sales for the third quarter of fiscal 2006 increased 56.7 percent to $31.8 million, compared with $20.3 million for the same period of the prior year. Comparable store sales increased 6.7 percent for the fiscal third quarter, compared with an increase of 9.9 percent for the third quarter of fiscal 2005.

The company reported a net loss for the third quarter of $1.6 million, or a loss of 15 cents per diluted share, compared with its guidance for a net loss of $2.2 million to $1.8 million. The company typically reports a net loss in its fiscal third quarter, its lowest volume period due to seasonality. Golf Galaxy reported net income of $3.4 million, or 43 cents per diluted share, for third quarter fiscal 2005, which included a pre-tax gain of $8.4 million realized on the sale of its equity investment in Golf Town Canada Inc. stock. Excluding this one-time gain and giving effect to the conversion of preferred shares and the company's initial public offering as of the beginning of the third quarter of fiscal 2005, the company's pro-forma net loss would have been $1.7 million, or a loss of 16 cents per diluted share, for the quarter ended Nov. 27, 2004. A reconciliation of pro-forma earnings per share is provided in a table that follows.

"We are very pleased with our results in the third quarter. A slow start in September was more than offset by strong sales in October and November," said Randy Zanatta, Golf Galaxy president, chief executive officer and chairman.  "In addition, we were comparing against a strong quarter last year."

Net sales for the nine months ended Nov. 26, 2005 increased 50.7 percent to $160.0 million, compared with $106.2 million for the same period of fiscal 2005. Comparable store sales increased 8.4 percent for the first nine months of fiscal 2006, compared with an increase of 7.1 percent for the same period of the prior year. Golf Galaxy reported net income of $5.5 million, or 58 cents per diluted share, for the first nine months of fiscal 2006, compared with net income of $8.0 million, or $1.04 per diluted share, for the nine months ended Nov. 27, 2004. Pro-forma diluted earnings per share for the nine months of fiscal 2006 increased 78.6 percent to 50 cents per diluted share, compared with 28 cents per diluted share for the nine months ended Nov. 27, 2004.

Golf Galaxy opened four new stores during its fiscal third quarter, including its first stores in the Denver, Omaha and Tulsa markets. The company also opened its third store in the Philadelphia market. Including the stores opened in the third quarter, Golf Galaxy has opened 15 new stores during the first nine months of fiscal 2006. As of Nov. 26, 2005, Golf Galaxy operated 49 stores in 23 states. The company said it plans to open one additional store during the current fiscal year, which ends Feb. 25, 2006.

Golf Galaxy plans to open 14 to 16 new stores during fiscal 2007. "We expect to continue our expansion and believe Golf Galaxy is well positioned to grow market share in a highly fragmented market," said Zanatta.

  Company Outlook
  The company said that for the fourth quarter of fiscal 2006:

  --  Net sales are currently expected to be $40 million to $42 million, an
      increase of 49 percent to 57 percent over the fourth quarter of fiscal
      2005;
  --  Comparable store sales are currently expected to increase in the mid
      single digits; and
  --  The company currently expects a net loss of $900,000 to $600,000.




For comparison purposes, Golf Galaxy has provided its fourth quarter fiscal 2005 results in a table that follows.

  The company said that for full fiscal year 2006:

  --  Sales are currently expected to be $200 million to $202 million, an
      increase of 50 percent to 52 percent over fiscal 2005;
  --  Comparable store sales are currently expected to be a 6 percent to 8
      percent increase over the prior year, consistent with the company's
      previous guidance; and
  --  Net income is currently expected to be $4.6 million to $4.9 million.

  Conference Call and Webcast


Golf Galaxy will hold its third quarter earnings conference call at 10 a.m. CST today, Dec. 20, 2005. Interested parties may listen to the call by dialing 800-299-6183 or international 617-801-9713 (passcode: 61629110). 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 Dec. 27.  The replay number is 888-286-8010 or international 617-801-6888 (passcode: 23966787). The webcast will be archived on http://www.golfgalaxy.com/ for approximately one year.

About Golf Galaxy, Inc.

Golf Galaxy, Inc., based in Eden Prairie, Minn., owns and operates golf specialty retail stores. The company currently operates 49 stores in 23 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. 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; and loss of key management. 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 prospectus in its Form S-1 Registration Statement on file with the Securities and Exchange Commission. 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 BALANCE SHEETS
  (In Thousands)

                                November 26,     November 27,
                                   2005             2004      February 26,
                                (unaudited)      (unaudited)    2005 (1)
  Assets
  Current assets:
    Cash and cash equivalents      $15,465          $9,486        $3,245
    Accounts receivable, net         6,143           3,682         3,455
    Inventories, net                43,305          29,268        30,415
    Prepaid expenses and other
     current assets                  4,678           4,612         3,510
  Total current assets              69,591          47,048        40,625
  Property and equipment, net       26,043          15,400        21,832
  Other assets                       2,508           2,146         2,680
  Total assets                     $98,142         $64,594       $65,137

  Liabilities and shareholders' equity (deficit)
  Current liabilities:
    Accounts payable               $21,923         $17,569       $15,826
    Accrued liabilities              9,987           9,532        11,675
  Total current liabilities         31,910          27,101        27,501
  Deferred rent credits and other   11,403           6,368         6,831
  Redeemable convertible
   preferred stock, including
   accumulated preferred
   stock dividends                       -          47,802        48,741
  Shareholders' equity (deficit)    54,829         (16,677)      (17,936)
  Total liabilities and
   shareholders' equity            $98,142         $64,594       $65,137

  (1) The Balance Sheet as of February 26, 2005 has been condensed from the
      audited financial statements.


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


                         Three Months Ended          Nine Months Ended
                            (Unaudited)                 (Unaudited)
                      November 26,  November 27,  November 26,  November 27,
                          2005          2004          2005          2004

  Net sales              $31,800      $20,281       $160,005       $106,240
  Cost of sales           23,915       15,192        111,822         74,713
  Gross profit             7,885        5,089         48,183         31,527
  Operating expenses:
    Store operating        7,594        4,793         29,299         18,892
    General and
     administrative        2,527        2,520          7,784          6,509
    Preopening               662          599          2,012          1,163
  (Loss) income from
   operations             (2,898)      (2,823)         9,088          4,963
  Other income                 -        8,410              -          8,410
  Interest income
  (expense), net             172           11            287            (21)
  (Loss) income before
   income taxes           (2,726)       5,598          9,375         13,352
  Income tax benefit
  (expense)                1,117       (2,247)        (3,844)        (5,363)
  Net (loss) income       (1,609)       3,351          5,531          7,989
  Less preferred stock
   dividends                   -         (937)        (1,721)        (2,757)
  Net (loss) income
   applicable to common
   shareholders          ($1,609)      $2,414         $3,810          5,232
  Net (loss) income
   per share:
    Basic                 ($0.15)       $1.30          $0.66          $2.81
    Diluted               ($0.15)       $0.43          $0.58          $1.04
  Weighted average
   number of shares
   outstanding:
    Basic             10,653,135    1,862,778      5,768,834      1,862,223
    Diluted           10,653,135    7,704,345      9,480,569      7,703,790


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

                         Three Months Ended           Nine Months Ended
                            (Unaudited)                   (Unaudited)
                      November 26,  November 27,  November 26,  November 27,
                          2005          2004          2005          2004
  Pro-Forma Information (1)
  Pro-forma net (loss)
   income applicable to
   common shareholders  ($1,609)      ($1,683)       $5,531        $2,955
  Pro-forma net (loss)
   income per share:
    Basic                ($0.15)       ($0.16)        $0.52        $0.28
    Diluted              ($0.15)       ($0.16)        $0.50        $0.28
  Pro-forma weighted
   average number of
   shares outstanding:
    Basic            10,653,135    10,615,245    10,642,002   10,614,690
    Diluted          10,653,135    10,615,245    11,150,898   10,703,790

  Reconciliation of
   pro-forma information
   to GAAP
  Net (loss) income
   applicable to
   common shareholders
   (GAAP)               ($1,609)       $2,414        $3,810       $5,232
  Gain on Sale of
   Golf Town Canada
   Inc. Stock, net of
   tax                        -        (5,034)            -       (5,034)
  Preferred Stock
   Dividends                  -           937         1,721        2,757
  Net (loss) income
   applicable to common
   shareholders
   (Pro-forma)          ($1,609)      ($1,683)       $5,531       $2,955
  Basic
  Weighted average
   number of shares
   outstanding
   (GAAP)            10,653,135     1,862,778     5,768,834    1,862,223
  Conversion of
   preferred stock
   to common                  -     5,752,467     3,202,839    5,752,467
  Weighted average
   additional shares
   issued in IPO               -    3,000,000     1,670,330    3,000,000
  Weighted average
   number of shares
   outstanding
   (Pro-forma)        10,653,135   10,615,245    10,642,002   10,614,690
  Diluted
  Weighted average
   number of shares
   outstanding
   (GAAP)             10,653,135    7,704,345     9,480,569    7,703,790
  Weighted average
   additional shares
   issued in IPO               -    3,000,000     1,670,330    3,000,000
  Weighted average
   shares deemed
   antidilutive (2)            -     (89,100)             -            -
  Weighted average
   number of shares
   outstanding
   (Pro-forma)        10,653,135  10,615,245     11,150,898   10,703,790

  (1) Pro-forma results for the quarter ended Nov. 27, 2004 exclude an
      after-tax gain of $5.0 million realized on the sale of the company's
      equity investment in Golf Town Canada Inc. stock. In addition, the
      pro-forma information 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 each period
      presented. 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.

  (2) The computation of pro-forma diluted earnings per share for the third
      quarter of fiscal 2005 excludes the impact of potentially dilutive
      securities that were included in the computation of diluted earnings
      per share in accordance with GAAP for the same period. The potentially
      dilutive securities were excluded from the computation of pro-forma
      diluted earnings per share since the effect would be antidilutive
      (i.e., including potentially dilutive securities would reduce the pro-
      forma loss per share).


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


                                             Three Months Ended
                                              February 26,2005

  Net sales                                        $26,840
  Cost of sales                                     19,251
  Gross profit                                       7,589
  Operating expenses:
    Store operating                                  5,490
    General and administrative                       1,863
    Preopening                                         932
  Loss from operations                                (696)
  Other income                                           -
  Interest income, net                                  17
  Loss before income taxes                            (679)
  Income tax benefit                                   228
  Net loss                                            (451)
  Less preferred stock dividends                      (939)
  Net loss applicable to common shareholders       ($1,390)
  Net loss per share:
    Basic                                           ($0.74)
    Diluted                                         ($0.74)
  Weighted average number of shares outstanding:
    Basic                                        1,877,044
    Diluted                                      1,877,044


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DATASOURCE: Golf Galaxy, Inc.



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

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



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

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