Soft sales of winter-related products caused by a flagging economy and a warmer-than-usual winter stymied sales for Big 5s fourth quarter. Overall, sales declined 5.4% to $219.6 million from $232.1 million in the year-ago period. Comps for Big 5 fell 8.6% for the period as management admitted a highly competitive holiday season ultimately caused merchandise margins to slip slightly.
For the quarter, management noted that hardgoods saw slightly better results than apparel and footwear, while continuing strength from firearms also boosted sales.
Gross margins declined 170 basis points for the fourth quarter to 32.5% of net sales, which fueled a 41.7% drop in net income to $3.6 million from $6.2 million for the year-ago quarter. Diluted earnings per share followed suit, dropping 39.3% to 17 cents per share from 28 cents last year.
Big 5 closed 2008 with 18 more stores than at the end 2007. Inventory on a per-store basis declined 11%. Due in large part to that inventory reduction, cash flow for the year increase 63% to $39.5 million from $24.7 million a year ago.
Management noted they had made concerted efforts to stymie SG&A spending for the quarter, shaving $2.6 million off expenses by reducing ad spending, lowering selling and administrative expenses and reducing store-related expenses. Big 5 also reduced company-wide headcount by 9%, primarily by attrition.
Citing unpredictable consumer demand and the efforts to intensify the focus on “long-term value to our shareholder,” Big 5 management said the quarterly dividend had been reduced from 99 cents to 5 cents a share. At the time of the conference call, the dividend offered shareholders a yield of approximately 3.7%.
For the first quarter, management added that the company expects a single-digit decline in same-store sales, with earnings in the range of one penny to 7 cents per diluted share.
