Big 5 Sporting Goods Corporations same-store sales fell 4.7% in the fourth quarter, causing net sales to dip 1% to $232.1 million, compared to $234.5 million for the fourth quarter of fiscal 2006.
The retailer attributed the decline primarily to a worsening economy that cut into store traffic, but plummeting sales of wheeled, or roller shoes, accounted for approximately 45% of the same-store sales decline.
Gross profit margin dipped 20 basis points to 34.1% during the quarter, causing gross profits to fall slightly to $79.2 million from $80.4 million in the same quarter a year earlier.
“Although weather conditions have benefited sales of winter-related products, we have not experienced strength in many of our other product categories,”said Steven G. Miller, the company's chairman, president and CEO. “Additionally, we expect product selling margins to be impacted in the first quarter, given continued weakness in the roller shoe product category, inflationary pressures and the fact that we have been slightly more aggressive in our promotional pricing efforts to drive sales and reduce inventory in this difficult environment.”
The lower margin was driven primarily by a 35-basis-point decline in product selling margins and higher store occupancy costs, partially offset by a decrease in distribution center expenses resulting from operational efficiencies realized in the company's new distribution center.
Selling and administrative expense as a percentage of net sales rose 220 basis points to 28.8% compared to 26.6%, primarily due to the lower than anticipated sales levels, higher store-related expenses reflecting an increased store count and higher advertising expenses resulting in part from the timing of co-op advertising programs.
Net income for the fourth quarter of fiscal 2007 plunged 35.4% to $6.2 million, or $0.28 per diluted share, from $9.6 million, or $0.42 per diluted share, for the fourth quarter of fiscal 2006.
Full year results
For the fiscal 2007 full year ended Dec. 30, 2007, net sales increased $21.5 million, or 2.5%, to $898.3 million from net sales of $876.8 million for fiscal 2006. Same store sales decreased 1.0% versus the prior year.
Net income was $28.1 million, or $1.25 per diluted share, for the fiscal 2007 full year, compared to net income of $30.8 million, or $1.35 per diluted share, in the fiscal 2006 full year.
“Our fourth quarter and full-year earnings are in line with our revised guidance and reflect the continued challenging macro-economic environment,” said Miller. “Like many other retailers, we experienced weak consumer spending during the holiday selling season. This softness in the retail environment has continued into the first quarter of fiscal 2008.”
Guidance
The company's guidance for the fiscal 2008 first quarter and full year assumes that sales will continue to be impacted by a challenging consumer environment throughout the year. Based on that assumption, the Company is providing the following guidance:
- For the fiscal 2008 first quarter, a decline in same store sales in the low to mid-single digit range and earnings per diluted share in the range of $0.17 to $0.23; and
- For the fiscal 2008 full year, a decline in same store sales in the low to mid-single digit range and earnings per diluted share in the range of $0.75 to $1.00.
A material improvement or decline in the overall consumer environment during the year could materially impact the Company's performance relative to this guidance.
Store Openings
The company opened ten new stores during the fourth quarter of fiscal 2007, bringing its store count at the end of fiscal 2007 to 363 stores, from 343 at the end of fiscal 2006. The company anticipates opening approximately 20 new stores, net of relocations and closures, during fiscal 2008.
BIG 5 SPORTING GOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
13 Weeks Ended 52 Weeks Ended
December 30, December 31, December 30, December 31,
2007 2006 2007 2006
Net sales $232,131 $234,542 $898,292 $876,805
Cost of sales (1) 152,911 154,148 589,150 575,577
Gross profit (1) 79,220 80,394 309,142 301,228
Selling and
administrative
expense (1) 66,918 62,361 256,180 242,769
Operating income 12,302 18,033 52,962 58,459
Interest expense 2,110 2,109 6,614 7,516
Income before
income taxes 10,192 15,924 46,348 50,943
Income taxes 4,010 6,288 18,257 20,108
Net income $6,182 $9,636 $28,091 $30,835
Dividends per share $0.09 $0.09 $0.36 $0.34
Earnings per share:
Basic $0.28 $0.43 $1.25 $1.36
Diluted $0.28 $0.42 $1.25 $1.35
Weighted-average
shares of common
stock outstanding:
Basic 22,087 22,661 22,465 22,691
Diluted 22,160 22,772 22,559 22,795
(1) The Company reclassified its previously reported condensed
consolidated statements of operations for fiscal 2006 periods to
conform to the current year presentation, which increased cost of
sales and decreased gross profit by $2.7 million and $9.7 million for
the fiscal 2006 fourth quarter and full year, respectively, and
increased selling and administrative expense for the fourth quarter
and full year by $1.9 million and $7.4 million, respectively, from
amounts previously reported. Historically, the Company has presented
total depreciation and amortization expense separately on the face of
its condensed consolidated statement of operations and corporate
headquarters' occupancy costs within cost of sales. In the fourth
quarter of fiscal 2007, the Company changed its classification of
distribution center and store occupancy depreciation and amortization
expense to cost of sales and store equipment and corporate
headquarters' depreciation and amortization expense to selling and
administrative expense. Depreciation and amortization expense is no
longer presented separately in the condensed consolidated statement
of operations. The corporate headquarters' occupancy costs are now
included in selling and administrative expense. This reclassification
had no effect on the Company's previously reported operating or net
income.
