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Big 5 Sporting (BGFV) Q1 Earnings Beat Estimates, Sales Miss

Zacks Equity Research

Big 5 Sporting Goods Corporation BGFV reported mixed results for first-quarter 2019, wherein earnings beat estimates while sales missed. Further, top and bottom lines reflected year-over-year growth. Notably, this marked the company’s first beat in four quarters. However, sales lagged estimates for the third time in the last four quarters.

The company posted adjusted earnings of 10 cents per share in the first quarter, beating the Zacks Consensus Estimate of 8 cents. Further, it recorded loss per share of 5 cents in the year-ago quarter.

Big 5 Sporting Goods Corporation Price, Consensus and EPS Surprise

 

Big 5 Sporting Goods Corporation Price, Consensus and EPS Surprise | Big 5 Sporting Goods Corporation Quote

Driven by the mixed quarterly results, shares of the company did not reflect significant movement in after-hours trading yesterday. Nevertheless, shares of this Zacks Rank #3 (Hold) company have declined 27.2% in the past three months against the industry’s growth of 13.1%.

 


Q1 Highlights

Net sales grew 4.7% to $245.3 million but missed the Zacks Consensus Estimate of $247 million. Further, comps rose 4.6% in the quarter under review. Sales and comps for the reported quarter benefited from the shift of the Easter holiday into the second quarter this year from its occurrence in the first quarter of the last year.

The company posted robust comps in January, driven by favorable winter weather and improved sales of winter-related products in very high-double digits. This resulted in high-teens comps growth in January. Further, comps rose  mid-single digit in February due to continued sale of winter products. However, comps in February were partly offset by soft sale of baseball and other product categories due to colder weather. Moreover, the persistence of winter weather in March led to a low-single-digit decline in comps due to soft sale of spring season merchandise despite the positive effect of the shift of the Easter holiday.

While comps rose in the high-teens range at the apparel category due to the robust sale of winter products in January and February, it was up low single-digits for the footwear category. However, comps declined in a low-single-digit for the hard goods category.

Costs & Margins

Gross profit totaled $75.9 million, up nearly 4.4% from the prior-year quarter. However, gross margin contracted 20 basis points (bps) to 30.9% mainly due to fall in distribution expenses capitalized into inventory, stemming from lower inventory levels, offset by decline in occupancy and warehouse expenses as a percentage of sales. Additionally, gross margin was favored by a slight increase in merchandise margin.

Selling and administrative expenses, as a percentage of sales, decreased 180 bps to 29.6%. Further, total selling and administrative expenses declined 1.2% to $72.6 million, owing to reduced print advertising and employee benefit-related costs, partly negated by increased store labor expenses and higher payment card transaction fees due to increased sales volume.

Moreover, the company recorded operating income of $3.3 million compared with operating loss of $0.8 million in the year-ago quarter.

Financial Position

Big 5 Sporting had $5.3 million in cash, long-term debt of $45.4 million and total stockholders’ equity of $175.4 million as of Mar 31, 2019. The company generated $12.5 million in cash from operations as of the end of the first quarter. The increase in operating cash flow mainly reflects working capital improvements in inventory and accounts payable as well as higher net income.

The company’s capital expenditure, excluding non-cash acquisitions, totaled $1.5 million in first-quarter 2019. For 2019, it expects capital expenditure, excluding non-cash acquisitions, of about $11-$15 million.

Concurrently, Big 5 Sporting announced a quarterly cash dividend of 5 cents per share, payable on Jun 14 to shareholders of record as of May 31.

Store Update

Big 5 Sporting did not open any store but closed three in the first quarter. As of Mar 31, 2019, the company operated 433 namesake stores.

In the second quarter of 2019, management plans to inaugurate one store. However, it intends to open about five stores and close four in 2019.

Guidance

Backed by the Easter holiday shift to the second quarter, the company has witnessed soft sales in the quarter-to-date period. Sales in this period have declined in a low-single digit due to the one less working day. Despite a soft consumer environment, the company is looking forward to sales gains during the high-volume periods in the second quarter, including Memorial Day, Father’s Day and the start of the summer season. Further, it expects favorable comparisons during these periods as the year-ago quarter was impacted by colder-than-normal weather.

Given the uncertainty, the company issued soft guidance for second-quarter 2019. It anticipates comps for the second quarter between a negative low-single digit and positive low-single digit compared with a 2.1% decline in the year-ago quarter. Further, it estimates loss per share of 4-12 cents compared with loss of 1 cent incurred in second-quarter 2018.

Notably, the second-quarter guidance reflects a negative impact of the calendar shift of the Easter holiday from first-quarter 2018 and into second-quarter 2019. Additionally, the shift of the 4th of July holiday to the third quarter this year is likely to add to the company’s woes.

Want Better-Ranked Stocks in the Retail Space? Check These

Hibbett Sports, Inc. HIBB has a long term earnings growth rate of 2.3%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bed Bath & Beyond Inc. BBBY presently carries a Zacks Rank #2. It delivered positive earnings surprises in the last two quarters.

Tractor Supply Company TSCO has an impressive long-term earnings growth rate of 11.3% and a Zacks Rank of 2 at present.

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