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Document 2 of 320.

Copyright 1998 Information Access Company,
a Thomson Corporation Company;
ASAP
Copyright 1998 Capital Cities Media Inc.
WWD

October 7, 1998

SECTION: No. 200, Vol. 175; Pg. 2; ISSN: 0149-5380

IAC-ACC-NO: 21193146

LENGTH: 623 words

HEADLINE: TSA BRACES FOR DEEPER QUARTER LOSS.

BYLINE: Ryan, Thomas J.

BODY:
NEW YORK -- The Sports Authority said it would take a $ 55 million third-quarter after-tax charge to close 18 of its 214 stores, write down inventory, make severance payments and pay for other restructuring.

The sporting goods superstore chain forecast a steeper loss from operations than expected due to "a difficult footwear environment, as well as continued softness in the men's apparel and golf categories."

Shares of Sports Authority on the New York Stock Exchange Tuesday fell 1 1/16 to 5 11/16. Its 52-week high is 21 7/8.

The news only adds to Sports Authority's tumultuous year, during which the chain aborted a merger agreement with Venator Group, rejected another merger proposal from Gart Sports and underwent virtually a complete change in top management in the last month.

Marty Hanaka, Sports Authority's chief executive officer since Sept. 15, said the stores to be closed were losing between $ 5.7 million and $ 6.4 million each year.

"Although closing stores and taking these charges are difficult and painful, we wanted to effect the necessary changes now in order to position our business for greater profitability in the future," Hanaka said in a statement.

Of the charge, $ 24.3 million will be for the closings, $ 13.4 million for asset write-downs, $ 8.1 million for asset impairments for six stores to remain open, $ 4.7 million for a tax restructuring, $ 2.6 million for corporate severance payments and $ 2 million in miscellaneous expenses.

For the third quarter ending Oct. 25, Sports Authority forecast a loss of 27 cents to 32 cents a share, excluding the charge. Wall Street was estimating a 3-cent loss.

Including the charge, losses are expected to be between $ 1.99 and $ 2.04 a share, compared with earnings of 6 cents a year ago. Net income in the year-ago quarter ended Oct. 26, 1997, came to $ 2 million.

Sales for the period are expected to be $ 365 million against $ 340.9 million a year ago, with same-store sales down between 5 percent and 5.5 percent.

"The continued negative trends in comparable-store sales have certainly been disappointing, and the difficulties in some key industry categories have resulted in substantial promotional pressure and increased markdowns," said Hanaka. "However, I continue to be optimistic about the long-term sporting goods industry outlook, given the anticipated growth in some of the hard lines areas and the increased participation in many sports."

William R. Armstrong, an analyst at Fahnestock & Co., said Hanaka's turnaround efforts would be undermined by a difficult retail climate, which has featured "very aggressive promotions" among sporting goods chains throughout the back-to-school season.

"He's doing what needs to be done to stop the bleeding and get the company back on its feet. But we're still faced with a very overstored sporting goods industry, and there's too much merchandise, particularly footwear, in the market," Armstrong said.

Hanaka succeeded founder Jack Smith, who continues as chairman. Prior to joining Sports Authority in February as vice chairman, Hanaka was president and chief operating officer of Staples, a retailer of office supplies.

Hanaka's appointment was followed by the resignation of president and chief operating officer Richard J. Lynch on Sept. 28, and the resignations of chief merchandising officer Robert J. Timinski and senior vice president of stores Arnold Sedel were announced on Monday.

The store closings will take place in the latter part of the fourth quarter, following the holiday season.

Sports Authority, based in Fort Lauderdale, Fla., operates 198 stores in the U.S., six in Canada and 10 in Japan under its joint venture agreement with Jusco Co. Ltd.

LANGUAGE: ENGLISH

IAC-CREATE-DATE: October 14, 1998

LOAD-DATE: October 15, 1998