Big 5 Sporting Goods Corporation was able to get up to date with its required SEC filings, prompting the Nasdaq Listing Qualifications Panel to restore its stock trading symbol to BGFV last week. The retailer was forced to restate earnings in a number of annual and quarterly reports due to issues discovered last year in its accounting of returns. Big 5 has filed all restated earnings reports, but was forced to delay filing of its fiscal 2005 first and second quarter 10-Q reports. They were able to file those reports before the September 30 extension date granted by NLQP.
First quarter results included charges associated with legal and audit fees related to the company's restatement and a flood loss at one of the company's store locations. The retailer also changed its methodology for accounting for returned products, established valuation allowances for all products in its inventory, and revised inventory cost capitalization methodologies, all of which are now reflected in the restated results.
The second quarter results reflected the same type of adjustments as well as charges associated with the move to the companys new distribution center and accrual adjustments relating to workers' compensation costs and employee bonuses, which were partially offset by the positive effects of the application of the revised inventory cost capitalization methodologies and a partial recovery of insurance proceeds relating to the fiscal 2005 first quarter flood loss.
Management said that second quarter sales were driven by increased customer traffic and a “slight increase” in average transaction size. Apparel was said to be the strongest category for the period, followed by footwear and then hardgoods. Gross margins were hurt during the quarter by a 90 basis point impact attributed to the new D.C. Still, product margins improved by 10 basis points.
Big 5 expects to see comp store sales growth in the low- to mid-single-digit range for the third quarter. Management said sales of performance apparel “remained strong” in Q3. They said apparel and hardgoods growth was stronger than footwear growth, alluding to “a little softness” in the category versus the earlier part of the year.
The change in the application of accounting methodologies is expected to carry over through the balance of the year.
Inventories on a per store basis at quarter-end were said to be up less than 1% compared to the same time last year.
| Big 5 Sporting Goods | ||||||
| Fiscal First Half Results | ||||||
| ($ millions) | First Quarter | Second Quarter | ||||
| 2005 | 2004 | Change | 2005 | 2004 | Change | |
| Total Sales | $190.1 | $181.9 | +4.5% | $198.1 | $184.7 | +7.3% |
| GM % | 35.7% | 37.5% | -180 bps | 36.6% | 36.9% | -30 bps |
| Net Income | $6.4 | $7.9 | -18.6% | $6.1 | $7.7 | -20.3% |
| Diluted EPS | 28¢ | 34¢ | -17.6% | 27¢ | 34¢ | -20.6% |
| Inventories* | $209.1 | $188.7 | +10.8% | $220.3 | $199.4 | +10.5% |
| Accts Recvble* | $99.7 | $70.5 | +41.4% | $100.0 | $73.2 | +36.6% |
| Comp Sales | +1.6% | +5.2% | +2.6% | +3.9% | ||
| * at quarter-end | ||||||
