##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

|      |  |                                                                                                                                      
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------
|[X]   |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act for 1934
for the quarterly period ended June 30, 2001
|     
|     
|     
|     
|[   ] |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act for 1934
for the transition period from  to         

Commission File Number: 0-20736

Sport Chalet, Inc.(Exact name of registrant as specified in its charter)

|                                                                       |  |                                                     
|---------------------------------------------------------------------- |  | ----------------------------------------------------
|Delaware                                                               |  | 95-4390071                                          
|(State or other jurisdiction of
        incorporation or organization) |  | (I.R.S. Employer Identification No.)                
|                                                                      
|920 Foothill Boulevard,                                                |  |                                                     
|La Canada, California                                                  |  | 91011                                               
|(Address of principal executive offices)                               |  | (Zip Code)                                          
|                                                                      
|                                                                       |  | (818) 790-2717                                      
|                                                                       |  | (Registrants telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|        |  |         
|------- |  | --------
|Yes [X] |  | No [   ]

Number of shares outstanding of the registrants common stock as of July 31,
2001: 6,580,001





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TABLE OF CONTENTS



|                               |                                                                                                |                                    |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ---------------------------------- |  |  |  |  |  | 
|Part I  Financial Information
|                               | Item 1. Financial Statements.                                                                 
|                               |                                                                                                | CONDENSED STATEMENTS OF INCOME    
|                               |                                                                                                | CONDENSED BALANCE SHEETS          
|                               |                                                                                                | CONDENSED STATEMENTS OF CASH FLOWS
|                               |                                                                                                | NOTES TO FINANCIAL STATEMENTS     
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|Part II  Other Information   
|                               | Item 1. Legal Proceedings.                                                                    
|                               | Item 5. Other Information.                                                                    
|                               | Item 6. Exhibits and Reports on Form 8-K.                                                     
|SIGNATURE                     
|EXHIBIT 99.1                  

SPORT CHALET, INC.

Index to Form 10-Q

|        |  |                                                                                       |  |      |    | 
|------- |  | ------------------------------------------------------------------------------------- |  | ---- | -- | 
|        |  | Part I  Financial Information                                                       
|        |  |                                                                                       |  | Page
|        |  |                                                                                       |  |     
|Item 1. |  | Financial Statements                                                                  |  |      | 3  | 
|       
|       
|       
|       
|Item 2. |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations |  |      | 7  | 
|       
|       
|       
|       
|        |  | Part II  Other Information                                                           |  |      |    | 
|       
|       
|       
|       
|Item 1. |  | Legal Proceedings                                                                     |  |      | 12 | 
|       
|       
|       
|       
|Item 5. |  | Other Information                                                                     |  |      | 12 | 
|       
|       
|       
|       
|Item 6. |  | Exhibits and Reports on Form 8-K                                                      |  |      | 12 | 

2



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##### Table of Contents












Part I  Financial Information

Item 1. Financial Statements.

SPORT CHALET, INC.

CONDENSED STATEMENTS OF INCOME
(UNAUDITED)

|                                                      |         |   |                             |           |      |   |            |           | 
|----------------------------------------------------- | ------- | - | --------------------------- | --------- | ---- | - | ---------- | --------- | 
|                                                      |         |   | Three months ended June 30,
|                                                      |         |   |                            
|                                                      |         |   | 2001                        |           | 2000
|                                                      |         |   |                             |           |     
|Net sales                                             |         | $ | 47,949,471                  |           |      | $ | 44,090,986 |          
|                                                     
|                                                     
|                                                     
|                                                     
|Cost of goods sold, buying and occupancy              |         |   | 32,974,251                  |           |      |   | 30,371,514 |          
|                                                      |         |   |                             |           |      |   |            |          
|Gross profit                                          |         |   | 14,975,220                  |           |      |   | 13,719,472 |          
|                                                     
|                                                     
|                                                     
|                                                     
|Selling, general and administrative
expenses          |         |   | 12,913,629                  |           |      |   | 11,437,259 |          
|                                                      |         |   |                             |           |      |   |            |          
|Income from operations                                |         |   | 2,061,591                   |           |      |   | 2,282,213  |          
|                                                     
|                                                     
|                                                     
|                                                     
|Interest income                                       |         |   | 69,361                      |           |      |   | 83,240     |          
|                                                      |         |   |                             |           |      |   |            |          
|Income before taxes                                   |         |   | 2,130,952                   |           |      |   | 2,365,453  |          
|                                                     
|                                                     
|                                                     
|                                                     
|Income tax provision                                  |         |   | 848,000                     |           |      |   | 943,000    |          
|                                                      |         |   |                             |           |      |   |            |          
|Net income                                            |         | $ | 1,282,952                   |           |      | $ | 1,422,453  |          
|                                                      |         |   |                             |           |      |   |            |          
|Earnings per share:                                   |         |   |                             |           |      |   |            |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic   |   | $                           | 0.19      |      |   | $          | 0.22      | 
|                                                      |         |   |                             |           |      |   |            |          
|                                                      | Diluted |   | $                           | 0.18      |      |   | $          | 0.21      | 
|                                                      |         |   |                             |           |      |   |            |          
|Weighted average number of common
shares outstanding: |         |   |                             |           |      |   |            |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Basic   |   |                             | 6,580,001 |      |   |            | 6,577,000 | 
|                                                      |         |   |                             |           |      |   |            |          
|                                                      | Diluted |   |                             | 6,999,670 |      |   |            | 6,703,637 | 
|                                                      |         |   |                             |           |      |   |            |          

See accompanying notes.

3



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##### Table of Contents






SPORT CHALET, INC.

CONDENSED BALANCE SHEETS

|                                                      |                                           |                                |                                           |                                            |  |               |            |                |  |        |            | 
|----------------------------------------------------- | ----------------------------------------- | ------------------------------ | ----------------------------------------- | ------------------------------------------ |  | ------------- | ---------- | -------------- |  | ------ | ---------- | 
|                                                      |                                           |                                |                                           |                                            |  | June 30, 2001 |            | March 31, 2001
|                                                      |                                           |                                |                                           |                                            |  |               |            |               
|                                                      |                                           |                                |                                           |                                            |  | (Unaudited)   |            |                |  |       
|ASSETS                                                |                                           |                                |                                           |                                            |  |               |            |               
|                                                     
|                                                     
|                                                     
|                                                     
|Current assets:                                       |                                           |                                |                                           |                                            |  |               |            |               
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash and cash equivalents                 |                                | $                                         | 1,826,508                                  |  |               | $          | 8,945,034      | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts receivable  net                 |                                |                                           | 843,289                                    |  |               |            | 519,677        | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Merchandise inventories                   |                                |                                           | 53,617,457                                 |  |               |            | 42,491,532     | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Prepaid expenses and other current assets |                                |                                           | 1,219,955                                  |  |               |            | 1,324,047      | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Refundable income tax                     |                                |                                           | 203,252                                    |  |               |            |                | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred income tax                       |                                |                                           | 1,762,598                                  |  |               |            | 1,928,710      | 
|                                                      |                                           |                                |                                           |                                            |  |               |            |               
|                                                      |                                           |                                |                                           | Total current assets                       |  |               | 59,473,059 |                |  |        | 55,209,000 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Furniture, equipment and leasehold improvements  net |                                           |                                | 22,104,815                                |                                            |  |               | 20,252,004 |               
|                                                     
|                                                     
|                                                     
|                                                     
|Deferred income tax                                   |                                           |                                | 95,433                                    |                                            |  |               | 95,433     |               
|                                                     
|                                                     
|                                                     
|                                                     
|Other assets                                          |                                           |                                | 235,348                                   |                                            |  |               | 265,421    |               
|                                                      |                                           |                                |                                           |                                            |  |               |            |               
|                                                      |                                           |                                |                                           | Total assets                               |  | $             | 81,908,655 |                |  | $      | 75,821,858 | 
|                                                      |                                           |                                |                                           |                                            |  |               |            |               
|LIABILITIES AND STOCKHOLDERS EQUITY                  |                                           |                                |                                           |                                            |  |               |            |               
|                                                     
|                                                     
|                                                     
|                                                     
|Current liabilities:                                  |                                           |                                |                                           |                                            |  |               |            |               
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts payable                          |                                | $                                         | 18,464,867                                 |  |               | $          | 11,950,684     | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Salaries and wages payable                |                                |                                           | 2,077,932                                  |  |               |            | 2,960,167      | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other accrued expenses                    |                                |                                           | 6,112,698                                  |  |               |            | 5,773,010      | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Income tax payable                        |                                |                                           |                                            |  |               |            | 1,286,861      | 
|                                                      |                                           |                                |                                           |                                            |  |               |            |               
|                                                      |                                           |                                |                                           | Total current liabilities                  |  |               | 26,655,497 |                |  |        | 21,970,722 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Deferred rent                                         |                                           |                                | 3,930,316                                 |                                            |  |               | 3,811,246  |               
|                                                     
|                                                     
|                                                     
|                                                     
|Stockholders equity                                  |                                           |                                |                                           |                                            |  |               |            |               
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Preferred stock, $.01 par value:          |                                |                                           |                                            |  |               |            |                | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                           | Authorized shares - 2,000,000  |                                           |                                            |  |               |            |                |  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                           |                                |                                           | Issued and outstanding shares  none       |  |               |            |                |  |        |            | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Common stock, $.01 par value:             |                                |                                           |                                            |  |               |            |                | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                           | Authorized shares - 15,000,000 |                                           |                                            |  |               |            |                |  |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                           |                                | Issued and outstanding shares  6,580,001 |                                            |  | 65,800        |            |                |  | 65,800 |           
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Additional paid-in capital                |                                |                                           | 21,842,340                                 |  |               |            | 21,842,340     | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Retained earnings                         |                                |                                           | 29,414,702                                 |  |               |            | 28,131,750     | 
|                                                      |                                           |                                |                                           |                                            |  |               |            |               
|                                                      | Total stockholders equity                |                                |                                           | 51,322,842                                 |  |               |            | 50,039,890     | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                           |                                |                                           | Total liabilities and stockholders equity |  | $             | 81,908,655 |                |  | $      | 75,821,858 | 
|                                                      |                                           |                                |                                           |                                            |  |               |            |               

See accompanying notes.

4



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SPORT CHALET, INC.

CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                                                              |                                              |                                           |            |                             |             |      |            |           |             |  
|----------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------- | ---------- | --------------------------- | ----------- | ---- | ---------- | --------- | ----------- | -
|                                                                              |                                              |                                           |            | Three months ended June 30,
|                                                                              |                                              |                                           |            |                            
|                                                                              |                                              |                                           |            | 2001                        |             | 2000
|                                                                              |                                              |                                           |            |                             |             |     
|Operating activities                                                          |                                              |                                           |            |                             |             |      |            |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Net income                                                                    |                                              | $                                         | 1,282,952  |                             |             | $    | 1,422,453  |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Adjustments to reconcile net income to net cash used in
operating activities: |                                              |                                           |            |                             |             |      |            |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Depreciation and amortization                |                                           |            | 1,296,000                   |             |      |            | 976,000   |            
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Deferred income taxes                        |                                           |            | 166,112                     |             |      |            | (209,050  | )          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Changes in operating assets and liabilities: |                                           |            |                             |             |      |            |           |            
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Accounts receivable                       |            |                             | (323,612    | )    |            |           | 1,761,484   |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Merchandise inventories                   |            |                             | (11,125,925 | )    |            |           | (10,301,638 | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Prepaid expenses and other current assets |            |                             | 104,092     |      |            |           | 11,992      |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Refundable income taxes                   |            |                             | (203,252    | )    |            |           |             |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Accounts payable                          |            |                             | 6,514,183   |      |            |           | 4,263,349   |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Salaries and wages payable                |            |                             | (882,235    | )    |            |           | 285,210     |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Other accrued expenses                    |            |                             | 339,688     |      |            |           | 415,248     |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Income tax payable                        |            |                             | (1,286,861  | )    |            |           | (717,595    | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                              | Deferred rent                             |            |                             | 119,070     |      |            |           | 73,407      |  
|                                                                              |                                              |                                           |            |                             |             |      |            |          
|Net cash used in operating activities                                         |                                              |                                           | (3,999,788 | )                           |             |      | (2,019,140 | )        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Investing activities                                                          |                                              |                                           |            |                             |             |      |            |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Other assets                                                                  |                                              |                                           | 30,073     |                             |             |      | 64,574     |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Purchase of furniture, equipment and leasehold improvements                   |                                              |                                           | (3,148,811 | )                           |             |      | (2,368,554 | )        
|                                                                              |                                              |                                           |            |                             |             |      |            |          
|Net cash used in investing activities                                         |                                              |                                           | (3,118,738 | )                           |             |      | (2,303,980 | )        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Decrease in cash and cash equivalents                                         |                                              |                                           | (7,118,526 | )                           |             |      | (4,323,120 | )        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Cash and cash equivalents at beginning of period                              |                                              |                                           | 8,945,034  |                             |             |      | 5,468,390  |          
|                                                                              |                                              |                                           |            |                             |             |      |            |          
|Cash and cash equivalents at end of period                                    |                                              |                                           | 1,826,508  |                             |             |      | 1,145,270  |          
|                                                                              |                                              |                                           |            |                             |             |      |            |          
|Supplemental Disclosure of Cash Flow Information                              |                                              |                                           |            |                             |             |      |            |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Cash paid during the period for:                                              |                                              |                                           |            |                             |             |      |            |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Income taxes                                 |                                           | $          | 2,172,000                   |             |      | $          | 1,879,000 |            
|                                                                              |                                              |                                           |            |                             |             |      |            |          
|                                                                              | Interest                                     |                                           |            |                            |             |      |            |          |            

See accompanying notes.

5



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##### Table of Contents






SPORT CHALET, INC.

NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

1.  Basis of Presentation

The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements. In the opinion of management,
all adjustments, consisting of normal recurring accruals, considered necessary
for a fair presentation of the results of operations for the periods presented
have been included.

The financial data at March 31, 2001 is derived from audited financial
statements which are included in the Companys Annual Report on Form 10-K for
the year ended March 31, 2001, and should be read in conjunction with the
audited financial statements and notes thereto. Interim results are not
necessarily indicative of results for the full year.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

2.  Earnings per Share

Earnings per share, basic, is computed based on the weighted average
number of common shares outstanding for the period. Earnings per share,
diluted, is computed based on the weighted average number of common and
potentially dilutive common equivalent shares outstanding for the period. A
reconciliation of the numerators and denominators is as follows:

|                                          |                                               |   |                             |           |      |   |           |           | 
|----------------------------------------- | --------------------------------------------- | - | --------------------------- | --------- | ---- | - | --------- | --------- | 
|                                          |                                               |   | Three months ended June 30,
|                                          |                                               |   |                            
|                                          |                                               |   | 2001                        |           | 2000
|                                          |                                               |   |                             |           |     
|Net Income                                |                                               | $ | 1,282,952                   |           |      | $ | 1,422,453 |          
|                                         
|                                         
|                                         
|                                         
|Weighted average number of common shares: |                                               |   |                             |           |      |   |           |          
|                                         
|                                         
|                                         
|                                         
|                                          | Basic                                         |   |                             | 6,580,001 |      |   |           | 6,577,000 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Effect of dilutive securities  stock options |   |                             | 419,669   |      |   |           | 126,637   | 
|                                          |                                               |   |                             |           |      |   |           |          
|                                          | Diluted                                       |   |                             | 6,999,670 |      |   |           | 6,703,637 | 
|                                          |                                               |   |                             |           |      |   |           |          
|Earnings per share:                       |                                               |   |                             |           |      |   |           |          
|                                         
|                                         
|                                         
|                                         
|                                          | Basic                                         |   | $                           | 0.19      |      |   | $         | 0.22      | 
|                                         
|                                         
|                                         
|                                         
|                                          | Effect of dilutive securities                 |   | $                           | 0.01      |      |   | $         | 0.01      | 
|                                          |                                               |   |                             |           |      |   |           |          
|                                          | Diluted                                       |   | $                           | 0.18      |      |   | $         | 0.21      | 
|                                          |                                               |   |                             |           |      |   |           |          

6



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|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- |  | --------------------------------------------------------------------------------------

Except for the historical information contained herein, the matters
addressed in this Item 2 constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements are subject to a variety of risks and uncertainties, including those
discussed below under the heading Factors That May Affect Future Results and
elsewhere in this Quarterly Report on Form 10-Q, that could cause actual
results to differ materially from those anticipated by the Companys
management. The Private Securities Litigation Reform Act of 1995 (the Act)
provides certain safe harbor provisions for forward-looking statements. All
forward-looking statements made on this Quarterly Report on Form 10-Q are made
pursuant to the Act.

The following should be read in conjunction with the Companys financial
statements and related notes thereto provided under Item 1 above.

Results of Operations

The following tables set forth statements of income data and relative
percentages of net sales for the periods indicated (dollar amounts in
thousands, except per share amounts).

|                                             |         |   |                             |      |         |  |        |   |         |   |        |      |  |  |       |   | 
|-------------------------------------------- | ------- | - | --------------------------- | ---- | ------- |  | ------ | - | ------- | - | ------ | ---- |  |  | ----- | - | 
|                                             |         |   | Three months ended June 30,
|                                             |         |   |                            
|                                             |         |   | 2001                        |      | 2000   
|                                             |         |   |                             |      |        
|                                             |         |   | Amount                      |      | Percent |  | Amount |   | Percent
|                                             |         |   |                             |      |         |  |        |   |        
|Net sales                                    |         | $ | 47,949                      |      |         |  | 100.0  | % |         | $ | 44,091 |      |  |  | 100.0 | %
|                                            
|                                            
|                                            
|                                            
|Gross profit                                 |         |   | 14,975                      |      |         |  | 31.2   |   |         |   | 13,719 |      |  |  | 31.1  |  
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |         |   | 12,914                      |      |         |  | 26.9   |   |         |   | 11,437 |      |  |  | 25.9  |  
|                                            
|                                            
|                                            
|                                            
|Income from operations                       |         |   | 2,062                       |      |         |  | 4.3    |   |         |   | 2,282  |      |  |  | 5.2   |  
|                                            
|                                            
|                                            
|                                            
|Interest income                              |         |   | 69                          |      |         |  | 0.1    |   |         |   | 83     |      |  |  | 0.2   |  
|                                            
|                                            
|                                            
|                                            
|Income before taxes                          |         |   | 2,131                       |      |         |  | 4.4    |   |         |   | 2,365  |      |  |  | 5.4   |  
|                                            
|                                            
|                                            
|                                            
|Net income                                   |         |   | 1,283                       |      |         |  | 2.7    |   |         |   | 1,422  |      |  |  | 3.2   |  
|                                            
|                                            
|                                            
|                                            
|Earnings per share:                          |         |   |                             |      |         |  |        |   |         |   |        |      |  |  |       |  
|                                            
|                                            
|                                            
|                                            
|                                             | Basic   |   | $                           | 0.19 |         |  |        |   |         |   | $      | 0.22 |  |  |       |   | 
|                                            
|                                            
|                                            
|                                            
|                                             | Diluted |   |                             | 0.18 |         |  |        |   |         |   |        | 0.21 |  |  |       |   | 

Three Months Ended June 30 2001 Compared to Three Months Ended June 30,
2000.Net sales have increased from $44.1 million for the three months ended
June 30, 2000 to $47.9 million for the same period this year, an 8.8% increase.
The increase is the result of a comparable store sales increase of 3.6%
coupled with the full quarter contribution from the Chino Hills store that
opened in July of last year and the opening of the Palmdale store in mid-June
2001. Excluding the sales of scooters, which were significant in the prior
fiscal year, net sales increased by 12.1% and comparable store sales increased
6.9% in the three months ended June 30, 2001 as compared to the three months
ended June 30, 2000. Management believes that the scooter phenomenon has run
its course and will be insignificant in the future. Comparable
store sales are based upon stores opened throughout both periods.

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Gross profit as a percent of sales increased from 31.1% for the three
months ending June 30, 2000 to 31.2% for the same period this year. The
increase is primarily due to the reduction of scooter sales that have a lower
gross profit percentage than the Companys overall product mix, partially
offset by increased markdowns. The increased markdowns were taken during the
three months ended June 30, 2001, to stimulate sales in the face of cooler
summer weather and a possibly weakening economy compared to the same period
last year.

Selling, general and administrative expenses as a percent of sales
increased from 25.9% for the three months ended June 30, 2000 to 26.9% for the
same period this year due primarily to Company expansion which includes
expenses related to (i) the opening of the newest location in Palmdale,
California, (ii) preparation for an opening in South Coast Plaza, a premier
Southern California shopping destination, and the Companys first out-of-state
store located in Henderson, Nevada, both planned to open in the fall of this
year and (iii) groundwork for a new larger distribution center scheduled to
open by March 2002.

The effective income tax rate was 39.9% for the three months ended June
30, 2000, compared to 39.8% for the same period this year, which differs from
the statutory rate as a result of permanent differences between financial
reporting and tax-basis income.

Net income decreased from $1.4 million, or $0.21 per diluted share, for
the three months ended June 30, 2000 to $1.3 million, or $0.18 per diluted
share, for the same period this year, primarily as a result of increased
selling, general and administrative expenses partially offset by increased
sales.

Liquidity and Capital Resources

The Companys primary capital requirements are for inventory and store
expansion, relocation and remodeling. Historically, cash from operations,
credit terms from vendors and bank borrowing have met the Companys liquidity
needs. Management believes that these sources will be sufficient to fund
currently anticipated cash requirements for the foreseeable future.

Net cash used in operating activities was $4.0 million for the three
months ended June 30, 2001 compared to cash used in operating activities of
$2.0 million for the same period last year. Net income provided cash of $1.3
million and $1.4 million for the three months ended June 30, 2001 and 2000,
respectively. Included in net income was non-cash depreciation of $1.3 million
and $976,000 for the same periods respectively.

Accounts receivable decreased by $1.8 million for the three months ended
June 30, 2000 as a result of the elimination of amounts due to the Company from
John Wells Golf Shops, the former operator of the leased golf department within
the Companys stores. On April 1, 2000, the Company purchased the inventory
and fixtures of the leased golf departments from the lessee and is operating
the golf departments directly.

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Inventories increased by $11.1 million and $10.3 million for the three
months ended June 30, 2001 and 2000, respectively, compared to the respective
year end balances primarily due to the seasonal build-up of summer related
inventory. Inventory at June 30, 2001 is $6.4 million greater than at the same
time last year due to (i) the opening of two new stores since June 30, 2000;
and (ii) the emphasis on showing a strong in-stock position on seasonal summer
items. Accounts payable increased by $6.5 million and $4.3 million for the
respective periods compared to the respective year end balances due primarily
to inventory build-up and the timing of payments to vendors.

Salaries and wages payable decreased by $882,000 for the three months
ended June 30, 2001, compared to an increase of $285,000 for the same period
last year, primarily as a result of the greater amount of incentive pay paid
during the first quarter related to the fiscal year ended March 31, 2001 as
compared to the prior year.

Net cash used in investing activities for the three months ended June 30,
2001 is $3.1 million, primarily from capital expenditures to enhance
merchandising presentation in the Companys older stores and the opening of one
new store. Net cash used in investing activities for the three months ended
June 30, 2000 was $2.3 million, primarily due to payments made for the
Companys point-of-sale system.

Net cash provided by financing activities has historically reflected
advances or pay down of the Companys revolving credit line. There were no
borrowings during either three-month period ended June 30, 2001 or 2000.

Factors That May Affect Future Results

The statements which are not historical facts contained in this Quarterly
Report on Form 10-Q are forward looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve risks and
uncertainties. These risks and uncertainties include, but are not limited to,
those set forth below.

Economic Conditions.The retail industry historically has been subject to
substantial cyclical variation, and a recession in the general economy or
uncertainties regarding future economic prospects that affect consumer spending
habits have had, and may in the future have, a materially adverse effect on the
Companys results of operations.

Competition.The sporting goods business and the retail environment are
highly competitive, and the Company competes with national, regional and local
full-line sporting goods chains, specialty stores, supplier owned stores,
discount and department stores, and e-tailers. A number of the Companys
competitors are larger and have greater resources than the Company.

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Regional Market Concentration.Currently, all of the Companys stores are
located in Southern California. Accordingly, the Company is subject to
regional risks, such as the economy, weather conditions, natural disasters and
government regulations. If the region were to suffer an economic downturn or
if other adverse events were to occur, there could be an adverse effect on the
Companys net sales and profitability and its ability to implement its planned
growth. Several of the Companys competitors operate stores across the United
States and, thus, are not as vulnerable as the Company to such regional risks.

Limited Expansion Locations.The real estate market for retail locations
in Southern California is limited and very competitive. The Companys growth
strategy contemplates locating suitable new store locations over the next
several fiscal years. Failure by the Company to locate suitable new store
locations would have a material adverse effect on the Companys implementation
of its growth strategy and sales volume.

Expansion Plan.The Companys continued growth is dependent to a
significant degree upon its ability to open new stores on a profitable basis.
The Companys ability to expand will depend, in part, on business conditions
and the availability of satisfactory store locations based on local competitive
conditions, site availability and cost, and the Companys ability to provide
and maintain high service levels and quality brand merchandising at competitive
prices. In addition, a decline in the Companys overall financial performance,
increased rents or any other adverse effects arising from the commercial real
estate market in the Companys markets may adversely effect the Companys
current growth plan. There can be no assurance that the Company will possess
sufficient funds to finance the expenditures related to its planned growth,
that new stores can be opened on a timely basis, that such new stores can be
operated on a profitable basis, or that such growth will be manageable.

Future Capital Requirements.The Company may not be able to fund its
future growth or react to competitive pressures if it lacks sufficient funds.
The Companys large investment in its information technology has, and the
planned distribution center is expected to, put a strain on cash flow.
Currently, the Company feels it has sufficient cash available through its bank
credit facilities and cash from operations to fund existing operations for the
foreseeable future. The Company cannot be certain that additional financing
will be available in the future if necessary.

Management of Growth.Since its inception, the Company has experienced
periods of rapid growth. No assurance can be given that the Company will be
successful in maintaining or increasing its sales in the future. Any future
growth in sales will require additional working capital and may place a
significant strain on the Companys management, management information systems,
inventory management, distribution facilities and receivables management. Any
failure to timely enhance the Companys operating systems, or unexpected
difficulties in implementing such enhancements, could have a material adverse
effect on the Companys results of operations.

Dependence on Key Personnel.The Company depends on the continued service
of its senior management. The loss of the services of any key employee could
hurt the business. Also, the future success of the Company depends on its
ability to identify, attract, hire, train and motivate other highly skilled
personnel. Failure to do so may adversely affect future results.

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Seasonality.The Companys business is seasonal in nature. As a result,
the Companys results of operations are likely to vary during its fiscal year.

Variability of Quarterly Results.The Company has experienced, and
expects to continue to experience, a substantial variation in its net sales and
operating results from quarter to quarter. The Company believes that the
factors which influence this variability of quarterly results include general
economic and industry conditions that affect consumer spending, changing
consumer demands, the timing of the Companys introduction of new products, the
level of consumer acceptance of each new product, the seasonality of the
markets in which the Company participates, the weather and actions of
competitors. Accordingly, a comparison of the Companys results of operations
from period to period is not necessarily meaningful, and the Companys results
of operations for any period are not necessarily indicative of future
performance.

Closely Controlled Stock.At June 30, 2001, Norbert Olberz, the Companys
founder, owned approximately 66% of the Companys outstanding common stock.
Mr. Olberz effectively has the ability to control the outcome on all matters
requiring stockholder approval, including, but not limited to, the election and
removal of directors, and any merger, consolidation or sale of all or
substantially all of the Companys assets, and to control the Companys
management and affairs.

Stock Price.The market price of the Companys common stock is likely to
be volatile and could be subject to significant fluctuations in response to
factors such as quarterly variations in operating results, operating results
which vary from the expectations of securities analyst and investors, changes
in financial estimates, changes in market valuations of competitors,
announcements by the Company or its competitors of a material nature, additions
or departures of key personnel, future sales of common stock and stock volume
fluctuations. Also, general political and economic conditions such as a
recession or interest rate fluctuations may adversely affect the market price
of the Companys stock.

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Part II  Other Information

Item 1. Legal Proceedings.

Kelly Silver v. Sport Chalet, Inc., Case No. 00CC08024, filed on July 7,
2000 in the Superior Court of the State of California, County of Orange.

This is a class action lawsuit brought by a former area manager, Kelly
Silver, against the Company. The complaint alleges a failure to pay overtime
wages to area managers, unfair business practices based upon the alleged
failure to pay overtime wages, fraud and deceit and negligent misrepresentation
based upon the failure to pay overtime wages, and conversion/theft of labor for
the alleged overtime hours.

The Company and plaintiffs have reached a tentative settlement of all
claims for all class members. The settlement is subject to court approval and
the Company has fully reserved for the anticipated cost of this litigation.




Item 5. Other Information.

Stockholder Proposals

The proxy materials for the 2001 annual meeting of the stockholders held
on August 1, 2001 were mailed to stockholders of the Company on June 22, 2001.
Under certain circumstances, stockholders are entitled to present proposals at
stockholders meetings. Any such proposal to be included in the proxy statement
for the Companys 2002 annual meeting of stockholders must be submitted by a
stockholder prior to February 21, 2002, in a form that complies with applicable
regulations. Recently, the SEC amended its rule governing a companys ability
to use discretionary proxy authority with respect to stockholder proposals
which were not submitted by the stockholders in time to be included in the
proxy statement. As a result of the change, in the event a stockholder
proposal is not submitted to the Company prior to May 8, 2002, the proxies
solicited by the Board of Directors for the 2002 annual meeting of the
stockholders will confer authority on the holders of the proxy to vote the
shares in accordance with their best judgment and discretion if the proposal is
presented at the 2002 annual meeting of stockholders without any discussion of
the proposal in the proxy statement for such meeting.

Chairman of the Board

On August 1, 2001, Craig Levra, the President and Chief Executive Officer
of the Company, was elected as the Chairman of the Board. Mr. Levra replaces
Norbert Olberz, the founder and principal stockholder of the Company. Mr.
Olberz was elected Chairman Emeritus and continues to serve as a director of
the Company. For further information, see the news release attached as Exhibit
99.1.




Item 6. Exhibits and Reports on Form 8-K.

| |     |  |                      |  |                                                                                                   
| | --- |  | -------------------- |  | --------------------------------------------------------------------------------------------------
| | (a) |  | Exhibits            
|
| |     |  | 99.1                 |  | News release: Sport Chalet Announces
Election of Craig Levra as Chairman of the Board             
|
| | (b) |  | Reports on Form 8-K.
|
| |     |  |                      |  | During the quarter for which this report on Form 10-Q
is filed, no reports on Form 8-K were filed.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized officer and principal financial officer.

|                      |                                                                                                                                          |                       
|--------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ----------------------
|                      | SPORT CHALET, INC.                                                                                                                      
|                     
|DATE: August 10, 2001 | By:                                                                                                                                      | /s/ HOWARD K. KAMINSKY
|                      |                                                                                                                                         
|                      | Howard K. Kaminsky
Executive Vice President-Finance, Chief
Financial Officer, and Secretary
(Principal Financial and Accounting Officer)

13