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More Than a Sporting Proposition

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Posted August 21, 2001 By Beth Cox     Feedback

Global Sports ups its financial guidance and signs an e-commerce services deal with Kmart's Bluelight.com that expands beyond sporting goods.

E-commerce company Global Sports Inc. issued an improved financial forecast today as it signed a deal with Kmart's Bluelight.com that for the first time will see the company operating e-commerce businesses beyond the sporting goods arena.

Bluelight.com signed a deal with Global to handle fulfillment, technology and customer service at its e-commerce site.

Kmart will select the merchandise to be sold on the site, own the inventory and compensate Global Sports for its services through a combination of fixed fees and a percentage of sales.

In 1999, Global Sports developed an e-commerce platform that now operates 21 e-commerce sporting goods businesses for companies such as The Sports Authority, The Athlete's Foot and QVC, among others.

Now, Global said, it has begun the second phase of its expansion strategy. In addition to the agreement with Kmart and Bluelight, Global Sports said it intends to pursue other opportunities outside of sporting goods, while continuing to grow its sporting goods business.

On the financial front, Global Sports said that fourth quarter revenues are expected to surpass $50 million, compared to the current estimate by analysts of $49.3 million. Pro forma operating profit is expected to exceed $2 million, the company said, versus the average of analysts' expectations of $600,000.

For fiscal 2002, the company said net revenue is expected to exceed $185 million, compared to the average of analysts' expectations of $177.5 million, and pro forma operating profit is expected to exceed $10 million versus the average of analysts' expectations of $2.5 million.

The market reacted positively to both pieces of news, sending Global Sports (NASDAQ:GSPT) up 84 cents in early trading, to $19.55, close to its 52-week high of $19.87.

"We have spent nearly three years building and operating an e-commerce platform that is well suited to handle merchandise categories beyond sporting goods and an infrastructure that has the capacity to accommodate a significant expansion of our business," said Michael G. Rubin, chairman and CEO of Global. "With our current business enjoying sustained momentum, we believe that the timing is right to embark on additional growth initiatives."

"Being selected by one of the largest retailers in the country as their e-commerce partner, after they conducted an extensive analysis of available options, is a great validation of our overall business," Rubin said.

Kmart (NYSE:KM) acquired Bluelight, its free Internet service provider (ISP) arm, in July, two months after the parent company ousted the top management and cut 38 members of the Bluelight staff to merge marketing and buyer functions.

The transition to Global Sports' fulfillment, technology and customer care resources is expected to be completed by the end of the third quarter of 2001.

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