Sporting products retailer,
Big 5 Sporting Goods Corp.
) posted robust second-quarter 2012 earnings per share of 15 cents,
surpassing the Zacks Consensus Estimate of 10 cents. However,
quarterly earnings slipped 6.3% from 16 cents per share earned in
the year-ago quarter.
Net sales of $226.6 million rose 3.2% from the prior-year quarter
sales of $219.6 million, marginally missing the Zacks Consensus
Estimate of $227 million. Sales in the quarter mainly benefited
from merchandise and marketing initiatives implemented in the last
However, quarterly sales were slightly impacted by the shift of
the 4th July holiday into the third quarter. Second quarter
same-store sales increased 1.0%, rising for the first time since
the third quarter of 2010.
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Quarter at Length
Gross profit in the quarter increased 1.8% to $73.1 million, while
gross profit margin contracted 50 basis points to 32.2% due to
increased store occupancy and distribution expenses, partly offset
by a 12 basis-point rise in merchandise margins.
Selling and administrative expense as a percentage of net sales
expanded 20 basis points to 30.3%, attributable to increased store
related expenses due to increased store count and higher employee
benefit-related costs, offset by lesser advertising expenses as
well as a downside in debit card fees due to recent federal
Consequently, operating income declined 8.4% to $4.5 million, while
operating margin contracted 20 basis points to 2.0%.
As of July 1, 2012, Big 5 had cash and cash equivalents of $6.2
million, long-term debt of $71.4 million and shareholders' equity
of $154.2 million.
Additonally, the company continues to enhance shareholder value by
returning cash in the form of dividends and share repurchases. Big
5 declared a quarterly cash dividend of 7.5 cents a share, payable
on September 14, 2012 to shareholders of record as of August 31,
In the second quarter, the company bought back 131,420 shares
valued at $0.9 million. As of July 1, 2012, the company had nearly
$10.9 million available for buyback under its $20.0 million
authorization, approved in the fourth quarter of fiscal 2007.
In the second quarter, Big 5 inaugurated three stores and closed
three others, retaining its store count at the end of the quarter
to 407 stores. Of those opened in the quarter, one was a relocated
store. Further, one among the closed stores was also related to
Management expects earnings per share in the third quarter to range
from 28 cents to 34 cents per share, compared with 27 cents per
share in the comparable quarter last year. Same store sales are
expected to be in the low to mid-single-digit range.
Looking ahead, Big 5 plans to open 9 new stores in the fourth
quarter of fiscal 2012 and close one store which relates to
relocation. For fiscal 2012, the company targets to open nearly 13
new stores, relocate about 3 stores and close 3 stores. At
year-end, the company's total store count is expected to reach 416.
Big 5 faces intense competition from national players such as
Dick's Sporting Goods Inc.
Hibbett Sports Inc.
), mass merchandisers such as
Wal-Mart Stores Inc.
), as well as regional and local sporting goods stores.
Big 5 currently retains a Zacks #3 Rank, which translates into a
Hold rating. Our long-term Neutral recommendation is guided by the
company's strategy of resuming the store expansion program to boost
its top line, offset by the sluggish top- and bottom-line
performances in the recent quarters.