Good day, everyone, and welcome to the Golfsmith International Holdings, Inc. First Quarter 2011 Earnings Conference Call. Just a reminder today’s call is being recorded. And at this time, I would like to turn things over to Ms. Jean Fontana. Please go ahead, ma’am.

Good morning, everyone, thank you for joining us today to discuss Golfsmith’s first quarter 2011 earnings results. As a reminder, our presentation includes and responses to various questions may include forward-looking statements about the company’s financial results and about future plans and objectives. Any such statements are subject to risks and uncertainties, which could cause the actual results and the implementation of the company’s plans and operations to vary materially. These risks are discussed in the company’s annual report on Form 10-K filed with the SEC. We issued a press release this morning. If you have not received a copy, you can find it on our website or by calling Investor Relations at 203-682-8200. Presenting on the call today we have Golfsmith’s Chairman and CEO, Martin Hanaka as well as Chief Financial Officer and Chief Operating Officer, Sue Gove. With that, I’ll turn the call over to Marty.

Thank you very much and good morning everybody. With me in Austin today are Anna Jobe, our Controller; our General Counsel, Jim Eliasberg; and [Jeff Laforce]. Sue Gove is joining us remotely. We are really excited on the momentum we’re building at Golfsmith from the fourth quarter and the first quarter 2011. Q1 represents our best year-over-year quarterly performance in almost six years. The initiatives that our team has put in place such as really focusing on the Web business, improving our selling culture and shifting our mix into apparel are really beginning the show results. The industry consolidation and competitor closings are also a net positive for us. So hopefully that will continue. We think it will come to least into Q3, but it looks like business is stabilizing around the country too. Not only are we seeing strong sales across all of our channels, but also continue to gain market share within the golf industry. At least for the first two months we have double-digit share gains both in dollars and units according to Golf Datatech. Our direct business was up 20.7 and what’s really encouraging is our Web business was up 30.3%, so excited on that trend again on top of 40% in Q4. We benefited from technological advancements in equipment, some new store openings. In fact we opened two and have six new stores over the last 12 months. We opened both in the town of Florida and St. Louis. And I’m pleased to announce today that our third store will open in June in Tysons Corner, Virginia. Our signature club-fitting has really worked out. Our Play Better Guarantee is producing double-digit results again and again, and we are very pleased with the progress there. So, overall, very pleased with the first quarter results and look…

Okay, thank you. Good morning, everyone. I’ll first review our first quarter financial results and then we’ll provide an update on the initiatives that we laid out last quarter to driving sales and earnings growth in 2011. For the first quarter of fiscal 2011, net revenues increased 20.5% to $81.5 million compared to $67.6 million in the first quarter of last year. Sales were driven by six new store openings the first quarter of last year as well as by comparable store sales increase of 13.4%. Our average transactions grew 7% reflecting the improvements we made to our merchandise assortment and our continued focus on improving our selling culture. As Marty mentioned, sales were positively impacted by continued consolidation in the industry and number of new technology advancements, product launches, the increase in our custom fitting and our new store growth, all of which have combined to create record sales momentum and a significant market share increase. Further, net revenues reflect a 20.7% increase from our direct-to-consumer channel, led by an increase in Web sales of over 30%. Our Web business continues to be a key strategic focus for the company as we move through 2011. Gross profit increased 20.4% to $27.4 million compared to $22.8 million in the first quarter of last year. Gross margin was 33.6% as compared to 33.7% for the same period last year. This 10 basis point decline in gross margin was primarily due to an increase in shipping and freight costs associated with free shipping offers on our direct business in which we generated record sales. Gross margins were also impacted by a 20 basis point reserve for price repositioning of used clubs. This was almost entirely offset by improved merchandise margins driven by a sales shift to higher margin categories. SG&A expense increased…

Great. Sue, no more comments. Thank you very much. I would like to open up to questions, please.

Thank you. (Operator Instructions) We will take our first question from Jennifer Davis with Lazard Capital Markets.

Hi, guys. Congratulations on a great start to the year.

Thank you.

My first question is around gross margins. I understand the free shipping would have a negative impact, but I guess some surprised that we didn’t see more of a positive impact from; I think you have about a point shift in proprietary mix and then also an increase in higher margin apparel sales. So could you talk a little bit about that and then how we should think about that going forward as well?

Yeah. Our merchandise margins were solid and the mix was solid. It was really between merch margin and our gross margin with shipping cost. But Sue, do you want to elaborate in detail on that please.

Sure. Yes, as Marty mentioned, we did achieve our merchandise margin objective. So we are affecting the mix affects that that we called out in our strategy. As we commented the free shipping is a factor and again as our web business does grow disproportionately that will have a small drag on the gross margin or the benefit that we’re achieving in merch margin. I also commented that we did make a reserve adjustment right at the end of the quarter for repositioning some used clubs. So that was really a one-time affect and I don’t think we’ll have an affect on the remainder of the year. But, again for the balance of the year as the web does continue to really outperform the overall growth rate, it could have as much as 20 basis point effect on gross margin.

Okay. So, we have about a 20 basis point impact. I guess what about leverage like buying and occupancy leverage with the comp. How much of an impact does that have and then...

Buying and occupancy is not in our gross margin. It’s in SG&A.

Okay.

Okay.

All right. Thanks. And then, going into the first quarter, I think Marty, you had said that you were a little bit late on apparel inventory. Can you talk about how you field out your position now?

We’re in great position. Apparel was up double digits. We’re in a great inventory position heading into the Christmas selling season for us. So we’re pretty confident. That was a great problem because we outsold it. And we did the same thing last summer actually, but our people really put together a great transition plan this year and we think we’ve covered it off very well. Not concerning going forward.

Okay. Thanks.

Jennifer, I just want to go back and then make sure that we’re clear. I’m not saying that overall margins are going to be down 20 basis points, I’m saying the affect.

Right.

Right, shipping. So where we still ship still achieve our overall merch margin growth impact that we’re seeing.

So, going forward for the next probably second quarter and third quarter we should think of gross margins about flattish with the benefits of the higher margin businesses offset by higher shipping costs? And then in the fourth quarter you should probably anniversary that.

Yes, I would say slightly up but not as dramatic as you had called out earlier. I think you said that you were expecting 100 basis points.

Yes.

So, no, not a 100, but somewhere between there.

All right. Thanks.

Okay.

Thank you very much.

(Operator Instructions)

Why don’t we wrap it up?

All right. At this time, there are no questions.

Okay. Thank you very much. Obviously, we are excited about our results, very pleased, best performance year-over-year in a quarter in almost six years. And kudos to our entire team for the dedication, we’re reaping the results they produce. We think we’re really well positioned to capitalize on these new product trends and the shrinking competitive playing field, which we hope continues as well. Look forward to our second quarter call, our biggest quarter of the year. Thank you very much for your interest in Goldsmith. Good day.

And that does conclude today’s teleconference. Thank you all for joining.