We have maintained our long-term Neutral recommendation on
Big 5 Sporting Goods Corporation
). Our recommendation is based on the company's strategy of
resuming the store expansion program along with improved earnings
outlook for the third quarter of fiscal 2012.
Lately, Big 5 reported a better-than-expected bottom-line
performance for the second-quarter of fiscal 2012. The company's
earnings of 15 cents per share for the second quarter of fiscal
2012 came ahead of the Zacks Consensus Estimate of 10 cents but
fell short of the prior-year quarter's earnings by a penny. The
company's sales grew 3.2% year over year to $226.6 million
primarily benefiting from its initiatives implemented to improve
merchandise and marketing.
Following better earnings result, Big 5 anticipates its earnings
for the third quarter to grow year over year in the range of
3.5%-26% to 28-34 cents per share compared with the earnings of 27
cents in the year-ago period.
Further, we believe the company's top line will further augment
in future with the strategy of resuming the store expansion
program. Big 5 intend to open 9 new stores in the fourth quarter of
fiscal 2012 and close one store, which relates to the 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.
Moreover, we consider the company's new business intelligence
system and distribution channel to significantly reduce the
However, intense competition with national chains such as
Dick's Sporting Goods Inc
Foot Locker Inc
) and mass merchandisers such as
Wal-Mart Stores Inc
) may hurt the company's future operating performance.
Further, we believe that the seasonal nature of business and
risks associated with sourcing from foreign countries may have an
adverse impact on the company's future growth prospect.
Big 5 Sporting Goods Corp. operates as a sporting goods retailer
in the western U.S. The company offers athletic shoes, apparel,
accessories and a broad selection of outdoor and athletic equipment
for team sports, fitness, camping, hunting, fishing, tennis, golf,
snowboarding, and in-line skating. At the end of second quarter of
fiscal 2012, the company operated 407 stores across 12 states in
the U.S. supported by a 953,000 square feet distribution center
located in California.
Currently, the company retains a Zacks #2 Rank, implying a
short-term Buy rating on the stock.
BIG 5 SPORTING (BGFV): Free Stock Analysis
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