Big 5 Sporting Goods Corp. reported earnings declined 5.2 percent in the fourth quarter ended January 2 as same-store sales inched up 0.2 percent. The sporting goods chain forecast a steep drop in sales and earnings in the first quarter due to tough year-ago comparisons.
Results were generally in line with an update given on January 16.
Steven G. Miller, chairman, president and CEO, said, “Our fourth-quarter performance capped off a second consecutive record year of sales and earnings. In addition to strong top-line sales, our 2021 results were driven by continued expansion of our merchandise margins, which reflected robust consumer demand, a constrained supply chain and a reduction in our promotions compared to pre-pandemic periods. With our strong earnings performance over the course of 2021, we enhanced our balance sheet while providing more than $69 million of capital back to shareholders through dividends and stock repurchases.”
As previously reported, for the 13-week fiscal 2021 fourth quarter, net sales were $273.4 million compared to net sales of $290.6 million for the 14-week fourth quarter of fiscal 2020. Same-store sales increased 0.2 percent for the fourth quarter of fiscal 2021 compared to the fourth quarter of fiscal 2020 and increased 10.6 percent compared to the fourth quarter of fiscal 2019.
The results were in line with its initial guidance calling for same-store sales to be in the range of negative low-single-digits to positive low-single-digits.
As a result of the company’s fiscal calendar, the fourth quarter of fiscal 2021 included 13 weeks, the fourth quarter of fiscal 2020 included 14 weeks, the fiscal 2021 full year included 52 weeks and the fiscal 2020 full year included 53 weeks. The company’s same-store sales results for the fourth quarter reflect comparable 13-week periods, and for the full year reflect comparable 52-week periods.
Gross profit for the fiscal 2021 fourth quarter was $103.0 million, which compares to $102.4 million in the fourth quarter of the prior year. The company’s gross profit margin was 37.7 percent in the fiscal 2021 fourth quarter versus 35.2 percent in the fourth quarter of the prior year. The company’s merchandise margins increased by 194 basis points for the fourth quarter of fiscal 2021 compared to the fourth quarter of fiscal 2020 and increased by 437 basis points versus the fourth quarter of fiscal 2019. The increase in gross profit margin also reflected lower distribution costs, including costs capitalized into inventory, as a percentage of net sales, partially offset by the favorable impact from an insurance settlement in the prior-year period.
Selling and administrative expense as a percentage of net sales was 27.9 percent in the fiscal 2021 fourth quarter versus 25.6 percent in the fiscal 2020 fourth quarter. Overall selling and administrative expense for the quarter increased by $1.8 million from the prior year primarily due to increased store-related costs, along with higher advertising expenses, which remained substantially below pre-pandemic levels. The comparison to the prior year also reflected the prior-year period’s favorable impact from an insurance settlement.
Net income for the fourth quarter of fiscal 2021 was $19.9 million, or $0.89 per diluted share, above the high end of the company’s most recent guidance range, which was $0.84 to $0.86 per diluted share. This compares to net income of $21.0 million, or $0.95 per diluted share in the fourth quarter of fiscal 2020, which included a previously reported benefit of $0.12 per diluted share.
On January 16, Big 5 lifted its guidance to $0.84 to $0.86 compared to the company’s previous guidance for the fourth quarter of earnings per diluted share in the range of $0.55 to $0.70. Big 5 had said margins came in significantly ahead of plan.
For the 52-week fiscal 2021 full year, net sales increased to a record $1.16 billion compared to net sales of $1.04 billion for the 53-week fiscal 2020. Same-store sales increased 13.9 percent for the fiscal 2021 full year compared to fiscal 2020 and increased 17.5 percent compared to fiscal 2019. Net income for fiscal 2021 was a record $102.4 million, or $4.55 per diluted share, including a previously reported net benefit of $0.06 per diluted share. This compares to net income for fiscal 2020 of $55.9 million, or $2.58 per diluted share, including a previously reported net benefit of $0.25 per diluted share.
Adjusted EBITDA was $31.5 million for the fourth quarter of fiscal 2021 and was $152.0 million for the full 2021 fiscal year. EBITDA and Adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Financial Measures” below for more details and a reconciliation of non-GAAP EBITDA and Adjusted EBITDA to the most comparable GAAP measure, net income.
Balance Sheet
The company ended the 2021 fiscal year with no borrowings under its credit facility and with cash and cash equivalents of approximately $97.4 million. The year-end cash balance for fiscal 2021 compares to no borrowings under the company’s credit facility and $64.7 million of cash and cash equivalents as of the end of the 2020 fiscal year. Total merchandise inventories increased by approximately 7.1 percent as of the end of fiscal 2021 versus the end of the prior fiscal year.
Quarterly Cash Dividend and New Share Repurchase Program
During fiscal 2021, the company returned to shareholders over $69 million in value through a combination of regular and special cash dividends and open-market stock repurchases. In the fiscal 2021 fourth quarter, the company repurchased 260,825 shares of its common stock.
The Board of Directors declared a quarterly cash dividend of $0.25 per share, which will be paid on March 25, 2022, to stockholders of record as of March 11, 2022.
The company’s Board of Directors has authorized a new share repurchase program for the purchase of up to $25.0 million of the company’s common stock. This program replaces the company’s previous share repurchase program, under which $7.7 million remained available for repurchases. Under the current authorization, the company may purchase shares from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the Securities and Exchange Commission. However, the timing and amount of such purchases, if any, would be at the discretion of the company’s management and Board of Directors, and would depend on market conditions and other considerations.
First Quarter Guidance
For the fiscal 2022 first quarter, the company expects same-store sales to decrease 10 percent to 13 percent compared to the fiscal 2021 first quarter, with earnings per diluted share in the range of $0.30 to $0.40. This compares to a same-store sales increase of 31.8 percent and record first-quarter earnings per diluted share of $0.96 in the first quarter of fiscal 2021, which included a previously reported net benefit of $0.06 per diluted share.
The company’s sales and earnings guidance for the fiscal 2022 first quarter assumes that any new conditions relating to the pandemic, including any regulations that may be issued in response to the pandemic, will not materially impact the company’s operations during the period.
Miller commented, “Our outlook for the 2022 first quarter reflects very difficult comparisons to our record 2021 first quarter. Additionally, guidance reflects challenged quarter-to-date winter product sales resulting from unseasonably warm and dry winter weather in our western markets, along with headwinds related to the Omicron variant and ongoing supply chain disruptions. Despite these challenges, we believe we are positioned to deliver first-quarter earnings near or above any pre-pandemic first-quarter earnings in our history. Looking beyond the current quarter, while comparisons to the prior year will continue to be challenging, our outlook remains very positive, and we are confident in the flexibility of our business model and diverse product mix.”