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Big 5's 1Q Disappoints

Zacks Equity Research

Sporting products retailer, Big 5 Sporting Goods Corp. (BGFV) reported disappointing first-quarter 2012 results, below the Zacks Consensus Estimate. The quarterly earnings of 1 cent per share was below the Zacks Consensus Estimate of 3 cents per share.

However, earnings for the quarter trailed 92.3% from 13 cents per share reported in the same quarter last year and were near the lower end of the company’s guidance range of break-even to 6 cents per share.


Big 5’s net sales of $218.5 million in the reported quarter slipped 1.2% from the prior-year quarter sales of $221.1 million, missing the Zacks Consensus Estimate of $221 million. In the first quarter, same-store sales inched down 2.9%, resulting from unfavorable winter weather in most markets, where the company operates.

Quarter at Length

First quarter gross profit moved down 6.6% to $67.4 million while gross profit margin contracted 170 basis points to 30.9% due to lower merchandise margins driven by impacts of promotional activities and increased product costs as well as product mix shift resulting from unfavorable winter weather.

Selling and administrative expense as a percentage of net sales increased 10 basis points to 30.5% attributable to a decline in employee benefit-related costs, compared to higher-than-normal levels in the prior-year period, as well as a downside in debit card fees due to recent federal legislation.

Financial Update

As of April 1, 2012, Big 5 had cash and cash equivalents of $5.6 million, long-term debt of $60.2 million and shareholders’ equity of $153.8 million.

The company also continues to enhance shareholder value by returning cash in the form of dividend and share repurchases. Big 5 declared a quarterly cash dividend of 7.5 cents a share to be paid on June 15, 2012 to shareholders of record as of June 1, 2012.

In the first quarter, the company bought back 172,471 shares valued at $1.4 million. As of April 1, 2012, the company had nearly $11.8 million available to be bought back under $20.0 million authorization, approved in the fourth quarter of fiscal 2007.

Store Update

During the first quarter of 2012, Big 5 added one store, bringing its store count at the end of the quarter to 407 stores. The store opened in the first quarter is a relocation of an existing store, which is slated to close in the second quarter.


Management expects earnings per share in the second quarter to range from 5 cents to 11 cents per share compared with 14 cents per share in the comparable quarter last year. Same store sales are pegged in the positive low single-digit range.

Looking ahead, Big 5 plans to open three new stores in the second quarter of fiscal 2012, one of which will replace an existing store. The company expects to close four stores in the second quarter of 2012. For fiscal 2012, the company targets to open nearly 10 new stores, relocate about 6 stores and close 3 stores.

Of the 6 stores, which are lined up for relocation in fiscal 2012, Big 5 will shut 3 stores this year and 3 in the next year.

Our Take

Big 5 faces intense competition from national layers such as Dick's Sporting Goods Inc. (DKS) and Hibbett Sports Inc. (HIBB), mass merchandisers such as Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), as well as regional and local sporting goods stores.

Big 5 currently retain a Zacks #2 Rank, which translates into a Buy rating. Our long-term Neutral recommendation is guided by the company’s strategy of resuming the store expansion program to boost top line, offset by the sluggish top- and bottom-line performances in the recent quarters.

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