Big 5 Sporting Goods Corp. ( BGFV ) posted robust
fourth-quarter 2012 results with earnings rising nearly four-fold
to 19 cents per share against 5 cents reported in the comparable
year-ago quarter. The year-over-year increase was primarily driven
by strong sales growth and improved margins. Moreover, the
quarterly earnings of this Zacks Rank #2 (Buy) company came a penny
ahead of the Zacks Consensus Estimate.
Quarter in Detail
Net sales for the quarter increased approximately 7.4% to $243.6
million compared with $226.7 million in the fourth quarter of 2011
and surpassed the Zacks Consensus Estimate of $242.0 million. Sales
in the quarter mainly benefited from favorable weather conditions
during winter as well as the company's ongoing merchandise and
Same-store sales increased 6.5% over the year-ago quarter,
driven by improvement across all geographies as well as all major
product categories of apparel, footwear and hard goods.
The company witnessed a high-single-digit growth in average
ticket and demonstrates efficient expense leverage, which aided it
to boost merchandise and operating margins, ultimately driving
earnings growth. However, Big 5 observed a fall in customer traffic
of low-single digit.
Gross profit in the quarter increased 10.9% to $78.4 million,
while gross profit margin expanded 100 basis points (bps) to 32.2%
due to a 20 bps improvement in merchandise margins, coupled with
the leveraging of store occupancy and distribution expenses.
Selling and administrative expense, as a percentage of net
sales, contracted 210 bps to 29.2%. However, in dollar terms,
selling and administrative expenses increased $0.4 million to $71.2
million. The escalation is primarily attributable to increased
store-related expenses due to higher store count and elevated
employee benefit-related costs, which were somewhat offset by
reduced advertising expenses.
Operating income for the quarter stood at $7.2 million against a
loss of $0.2 million reported in the fourth quarter of 2011.
Consequently, operating margin came at 2.9%. The year-over-year
improvement in operating margin was primarily driven by increased
gross profit margin and reduced selling and administrative expenses
as a percentage of sales.
Big 5 ended the year with cash and cash equivalents of $7.6
million compared with $4.9 million in 2011. The company's inventory
levels at the end of 2012 remained flat year over year at $270.4
million on a per-store basis.
During the fiscal, the company generated a cash flow of $39.6
million from its operational activity. The improved cash flow
facilitated it to reduce credit facility by 25% to $47.5 million,
invest in store opening and remodeling activities, and distributed
$10.0 million to shareholders in the form of share repurchase and
dividend payments. Shareholders' equity at the end of the year
stood at $164.4 million.
The company continues to enhance shareholder value by returning
cash in the form of dividends and share repurchases. Subsequent to
the earnings results, Big 5 declared a quarterly cash dividend of
10 cents per share, reflecting an increase of 33.3% from the last
paid dividend of 7.5 cents. Dividend will be paid on Mar 22, 2013
to shareholders of record as of Mar 8, 2013.
In the fourth quarter, the company bought back 40,000 shares
valued at $0.4 million. As of Dec 30, 2012, the company had nearly
$9.6 million available for buyback under its ongoing $20.0 million
authorization, approved in the fourth quarter of 2007.
In the reported quarter, Big 5 inaugurated 8 stores and closed
one, increasing its store count at the end of fiscal to 414 stores.
Of those opened in the quarter, one store was relocated.
In anticipation of favorable weather conditions in winter and
higher demand for firearms and ammunition products, management
expects same store sales in the first quarter of 2013 to grow in
the high-single-digit range. Further, the company anticipates
earnings for the quarter to come between 18 cents and 24 cents per
Looking ahead, Big 5 plans to open one new store, while it has
shuttered one store related to relocation since the beginning of
the first quarter of 2013. For full-year 2013, the company targets
to open nearly 15 to 20 new outlets, of which three will be
relocations. Further, the company plans to close 3 relocated
Other Stocks to Consider
Apart from Big 5, other stocks in the sporting goods retail
industry worth considering include Hot Topic Inc.
( HOTT ),
Cabela's Inc. ( CAB ) and
Marinemax Inc. ( HZO ). All these stocks
hold a Zacks Rank #2 (Buy).BIG 5 SPORTING (BGFV): Free Stock Analysis
ReportCABELAS INC (CAB): Free Stock Analysis ReportHOT TOPIC INC (HOTT): Free Stock Analysis
ReportMARINEMAX INC (HZO): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment