Gross margin improved to 37.6%, up 1.8 points from last year's quarter due to higher volumes, improved pricing, and cost savings.
Inventory balance was $163.7 million, down about $59.4 million from last year's third quarter and down from fiscal year-end.
Operating expenses decreased by $1.7 million versus prior year third quarter, or $3.7 million excluding a $2 million deferred compensation plan valuation increase.
Operating profit was $7.3 million versus an operating loss in the previous third quarter.
Sales in the third fiscal quarter ending June 2025 increased 5% to $180.7 million compared to $172.5 million in the prior year third quarter.
The company remains debt-free with a solid cash position.
Cash from operations was slightly negative due to timing of vendor payments; capital expenditures were $7 million; $10 million spent on principal payments for financing leases; dividends distributed were $9 million.
Gross margin decreased 170 basis points year-over-year due to higher technician labor costs from wage inflation and higher material costs driven by trade down to Tier 3 tires and increased self-funded promotions.
Net bank debt was $64 million with $398 million available under credit facility and $8 million in cash; inventory levels reduced by approximately $10 million due to store closures.
Net loss was $8.1 million compared to net income of $5.9 million last year; diluted loss per share was $0.28 versus diluted earnings per share of $0.19 last year; adjusted diluted EPS remained flat at $0.22.
Operating loss was $6.1 million or negative 2% of sales, compared to operating income of $13.2 million or 4.5% last year; adjusted operating income was $14 million or 4.7% of sales, slightly down from $14.7 million or 5%.
Sales increased 2.7% to $301 million in the first quarter, driven by a 5.7% increase in comparable store sales, partially offset by sales reduction from closed stores.
Total operating expenses were $113 million or 37.5% of sales, up from $95.9 million or 32.7% last year, mainly due to $14.8 million in store closing costs and $4.7 million consulting costs.
Active Lifestyle segment revenue declined $36 million to $214 million, driven by Jack Wolfskin sale and soft market conditions, but operating income increased by $6 million due to cost savings and the sale.
Consolidated revenues for Q2 2025 were $1.11 billion, a 4% year-over-year decrease primarily due to the sale of Jack Wolfskin and softness in the Active Lifestyle segment.
Excluding Jack Wolfskin, sales declined approximately 2%, mainly due to a 6% decline in Topgolf same venue sales.
Golf Equipment segment revenue was flat year-over-year at $412 million, with operating income down 1%, but year-to-date operating margins improved over 200 basis points.
Inventory decreased by $38 million to $609 million, mainly due to Jack Wolfskin sale offsetting increases in Golf Equipment and Topgolf inventories.
Liquidity improved with cash increasing by $378 million to $1.16 billion, driven by proceeds from Jack Wolfskin sale and lease financing; net debt decreased to $2.39 billion.
Q2 adjusted EBITDA was $196 million, down 5% year-over-year, impacted by tariffs and foreign currency hedge losses but partially offset by cost savings and margin initiatives.
Topgolf revenue decreased 2% year-over-year with same venue sales down 6%, but adjusted EBITDA increased $1 million to $111 million, reflecting flat EBITDAR margins.
Adjusted EBITDA increased 9.7% to $150.2 million with a margin rate of 12.4%, up 30 basis points year-over-year.
Comparable store sales increased by 0.4%, marking the first quarterly increase since Q4 fiscal 2022.
Diluted earnings per share increased by 11.5% to $0.58 compared to $0.52 in the same period last year, reaching the high end of expectations.
Effective tax rate increased to 21.8% from 19.8% last year due to decreased excess tax benefits from stock-based compensation.
General and administrative expenses increased 2.6% to $69.4 million, with a decrease in other operating expenses partially offsetting personnel expense increases.
Gross profit rose by 8.5% compared to the same period last year, driven by a 7.1% increase in sales and a 60 basis points improvement in gross margin rate to 43.9%.
Inventory increased 7% sequentially and 17% year-over-year, driven by timing of receipts and support for new Seattle distribution center.
Net interest expense increased 62.3% to $1.1 million due to lower interest capitalized partially offset by higher interest income.
Preopening expenses decreased 51.8% to $5.1 million due to fewer store openings compared to last year.
Sales for the quarter rose by 7.1% to $1.214 billion.
Selling and store operating expenses increased by 10.2% to $376.2 million, primarily due to $33.8 million for new stores.
Unrestricted liquidity ended at $876.9 million, including $176.9 million in cash and $700 million available under ABL facility.
Dafinchi
