Big 5 Downgraded to Strong Sell

Zacks

Zacks Investment Research downgraded Big 5 Sporting Goods Corp. (BGFV) to a Zacks Rank #5 (Strong Sell) on Mar 1, 2014.

Why the Downgrade?

Big 5 has witnessed sharp downward estimate revisions for the upcoming quarter and fiscal 2014 after communicated highly disappointing comparable store sales (comps) and earnings forecast for the first quarter of fiscal 2014 despite strong year-end fiscal 2013 results. Shares of this athletic goods retailer have been on a downtrend since the announcement and given the projections laid out it has more downside left.

On Feb 25, Big 5 reported satisfactory financial results with adjusted earnings of 23 cents per share for fourth-quarter fiscal 2013, surging 21.1% year over year and beating the Zacks Consensus Estimate by a penny.

However, the company came up with disheartening projections as it anticipates a taxing first quarter fiscal 2014 ahead due to the diminished demand for firearms and ammunition products and an unusually harsh winter in the western markets zone coupled with severe drought conditions that hindered the demand for winter products.

The company expects comps to decline in the high single-digit range in the first quarter of fiscal 2014, with earnings per share coming in the range of 5 – 11 cents. Results for the upcoming quarter are expected to be a stark contrast compared with the extremely high demand for firearms and ammunition products and a favorable winter that fetched comps growth of 10.5% and earnings per share of 34 cents in the first quarter of 2013.

However, the company expects pressure of comparison against robust results last year to ease out beyond the first quarter, enabling it to generate positive comps through the rest of fiscal 2014. Nevertheless, the company projects firearm and ammunition sales to continue to impact comps throughout fiscal 2014.

The Zacks Consensus Estimate for the first quarter of fiscal 2014 decreased 70% to 9 cents per share over the last 7 days. For fiscal 2014 and fiscal 2015, all estimates were revised downward over the last 7 days. This resulted in the Zacks Consensus Estimate descending 21.9% to $1.14 per share for fiscal 2014 and 24.2% to $1.22 per share for fiscal 2015.

Other Stocks to Consider

Not all retailers are performing as poorly as Big 5. The following retail stocks with a favorable Zacks Rank are performing well and are worth considering.

1)    Barnes & Noble Inc. (BKS) carries a Zacks Rank #1 (Strong Buy)
2)    Iconix Brand Group Inc. (ICON) holds a Zacks Rank #1 (Strong Buy)
3)    Skechers USA Inc. (SKX) sports a Zacks Rank #2 (Buy)

Read the Full Research Report on SKX
Read the Full Research Report on BGFV
Read the Full Research Report on BKS
Read the Full Research Report on ICON


Zacks Investment Research

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