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Will Soft Comps Hurt Big 5 Sporting's (BGFV) Q2 Earnings?


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Big 5 Sporting Goods Corporation BGFV is slated to report second-quarter 2018 results on Jul 31.

The company delivered a positive earnings surprise in the last two quarters. Also, it pulled off an average earnings beat of 10.5% in the trailing four quarters.

Big 5 Sporting Goods Corporation Price, Consensus and EPS Surprise

Big 5 Sporting Goods Corporation Price, Consensus and EPS Surprise | Big 5 Sporting Goods Corporation Quote

However, the Zacks Consensus Estimate for second-quarter earnings is pegged at 11 cents, reflecting a year-over-year decline of 15.4%. Notably, estimates remained stable in the last 30 days. Management anticipates earnings per share to be in the band of 4-12 cents in the to-be-reported quarter.

Let's see how things are shaping up prior to this announcement.

Things to Know Ahead of 2Q18 Earnings

Big 5 Sporting has been witnessing soft comparable-store sales (comps) for the last few quarters now. In first-quarter 2018, comps fell 7.5% against an increase of 7.9% in the year-ago quarter. In fact, the metric was down in all three months of the quarter, with the highest decline witnessed in January.

Month-wise, comps dipped high-teens in January due to soft sales of winter products. However, it improved every week in February but declined in low mid-single digits. In March, the same decreased in low-single digits due to the shift of the Easter holiday in comparison with last year.

Soft comps have been weighing on the company's top line, which lagged estimates in two of the trailing four quarters. In the last reported quarter, sales declined 7.3% year over year due to an extremely challenging environment. Record warm as well as dry weather conditions in the company's markets have severely hurt its sales this year, particularly during the first seven weeks of the first quarter.

Additionally, soft hard goods category remains a headwind for a while now. Comps declined in mid to high single-digit range for hard goods in the first quarter of 2018.

Consequently, shares of this sporting goods retailer have lost 15.3% in the past month against the industry 's 2.7% increase.

However, management had earlier stated that the robust sales trend witnessed from January to March along with enhanced product margins continued in the second quarter as well. Furthermore, Big 5 Sporting expects to gain from the key spring selling season in to-be-reported quarter. As a result, comps are now projected to be flat to up low-single digits.

Also, the Zacks Consensus Estimate for revenues is $249.7 million, up 2.5% from the year-ago actual figure.

Meanwhile, Big 5 Sporting's commitment toward expanding its store base and introducing technological advancements to enhance services is quite encouraging. In addition, its unique strategy of offering exclusive branded merchandise sourced from leading manufacturers provides it with a competitive edge over its rivals. The company's merchandise strategy also helped it retain a solid inventory position.

Zacks Model

Our proven model does not conclusively show that Big 5 Sporting is likely to beat earnings estimates in the second quarter. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. But that is not the case here as elaborated below:

Big 5 Sporting has a Zacks Rank #3, which increases the predictive power of an earnings beat. However, the company has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 11 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Stocks with a Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Kohl's Corp. KSS has an Earnings ESP of +2.14% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Ralph Lauren Corp. RL has an Earnings ESP of +3.03% and a Zacks Rank of 3.

Nordstrom, Inc. JWN has an Earnings ESP of +0.68% and a Zacks Rank #3.

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Ralph Lauren Corporation (RL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: JWN , BGFV , KSS , RL



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