Big 5 Sporting Goods Corp (BGFV) Faces Headwinds: A Dive into Q4 and Full Year 2023 Financials
Net Sales: Q4 net sales dropped to $196.3 million from $238.3 million in the previous year.
Same Store Sales: Decreased by 17.7% in Q4 and 11.2% for the full year.
Gross Profit Margin: Fell to 30.2% in Q4 from 33.5% the prior year.
Net Loss: Reported at $8.9 million in Q4, a stark contrast to the net income of $1.7 million in Q4 of the previous year.
Adjusted EBITDA: Declined to $(8.7) million in Q4 from $6.9 million in the prior year.
Dividend: Quarterly cash dividend reduced to $0.05 per share from $0.125 per share.
Store Operations: Closed six stores in Q1 2024, with plans to open five and close four more during the rest of the fiscal year.
On February 27, 2024, Big 5 Sporting Goods Corp (NASDAQ:BGFV) released its 8-K filing, detailing the financial results for the fourth quarter and full year ended December 31, 2023. The company, a leading sporting goods retailer in the western United States, faced significant challenges in the fiscal year 2023, reflecting a downturn in sales and profitability amidst a difficult macroeconomic environment.
Financial Performance Overview
Big 5 Sporting Goods Corp reported a decrease in net sales for the fourth quarter to $196.3 million, down from $238.3 million in the same quarter of the previous year. The company also experienced a significant decline in same store sales, which decreased by 17.7% for the quarter. The gross profit margin for Q4 decreased to 30.2%, compared to 33.5% in the previous year's quarter, primarily due to higher store occupancy and distribution expenses.
The company's net loss for the fourth quarter was $8.9 million, or $0.41 per basic share, including a $0.02 store asset impairment charge. This is a notable decline from the net income of $1.7 million, or $0.08 per diluted share, reported in the fourth quarter of the previous year. For the full fiscal year 2023, Big 5 Sporting Goods Corp posted a net loss of $7.1 million, or $0.33 per basic share, compared to a net income of $26.1 million, or $1.18 per diluted share, for fiscal 2022.
Strategic Adjustments and Future Outlook
Steven G. Miller, the company's Chairman, President, and CEO, attributed the weak performance to the challenging macroeconomic environment, which has pressured discretionary spending. He also noted that unusual weather patterns affected sales of winter products, a key driver of Q4 results. The company's first quarter sales for fiscal 2024 continue to be impacted by macroeconomic uncertainty and extreme weather conditions.
In response to these challenges, Big 5 Sporting Goods Corp has focused on managing controllable aspects of the business, such as optimizing merchandise margins, managing inventory levels, and controlling expenses. The company ended the fiscal year with no borrowings under its credit facility and a cash balance of $9.2 million, down from $25.6 million at the end of fiscal 2022. Merchandise inventories decreased by 9.1% compared to the prior year, reflecting efforts to align inventory with sales.
The Board of Directors has declared a quarterly cash dividend of $0.05 per share, a reduction from the previous rate of $0.125 per share, to maintain a healthy financial condition amid ongoing economic challenges. For the fiscal 2024 first quarter, the company expects same store sales to decrease in the low double-digit range and anticipates a net loss per basic share in the range of $0.30 to $0.40.
During fiscal 2023, Big 5 Sporting Goods Corp opened two new stores and closed four, ending the year with 430 stores. As of the first quarter of 2024, the company has closed an additional six stores, with plans to open approximately five new stores and close around four more during the remainder of the fiscal year.
Investor Considerations
Investors should note that Big 5 Sporting Goods Corp operates in a highly competitive and rapidly changing environment, with various risk factors that could impact future results. These include changes in consumer spending, competition from e-commerce retailers, supply chain disruptions, and fluctuations in costs and operating expenses.
Value investors may find interest in the company's efforts to optimize its store base and manage capital effectively during these uncertain times. However, the reduced dividend and the expectation of continued economic headwinds suggest a cautious approach to the stock.
For a detailed analysis of Big 5 Sporting Goods Corp's financials, including the reconciliation of non-GAAP financial measures, investors are encouraged to review the full 8-K filing.
Explore the complete 8-K earnings release (here) from Big 5 Sporting Goods Corp for further details.
This article first appeared on GuruFocus.
