Shares of Sports Authority fell 20 percent after the world's largest retailer of sports equipment said it'll take a third-quarter restructuring charge of $55 million and post a loss for the quarter.
Sports Authority (TSA) shares dropped 1 3/8, or 20.4 percent, to 5 3/8 on the news.
The Fort Lauderdale, Florida-based company said the charge, which amounts to $1.72 a share, will cover the cost of closing 18 stores, writing down inventory, making severance payments and other related expenses.
Sports Authority said it sees a loss for the quarter of 27 cents to 32 cents, before the charge. Analysts surveyed by First Call had expected the company to lose 2 cents a share. In the year-ago period, Sports Authority earned 6 cents a share.
Including the charge, the company sees a loss of $1.99 to $2.04 a share.
The company's chief financial officer, Anthony Crudele, acknowledged that the magnitude of the announcement hit the stock hard. The number of stores to be closed, plus the size of the quarterly loss, may be greater than investors were expecting, he said.
"What's driving (the sell-off) is that operating earnings are below expectations," he said. Investors are expecting Sports Authority's management, which has been reshuffled in recent weeks, to right the business, Crudele said.
"Given that the closing locations were negatively impacting annual earnings by 18 cents to 20 cents, this action should have an equivalent positive effect on earnings in future years, " said Marty Hanaka, Sports Authority's chief executive, in a statement.
Sports Authority said it will close stores in the fourth quarter, after the holiday season.
Written By Stephanie O'Brien
CBSNews.com staff CBSNews.com staff