Big 5 Sporting Goods Corporation of Segundo, CA reported declining demand for guns and ammo dragged comp store sales down 4.9 percent in the fiscal second quarter ended June 29.

“Our second quarter results reflect significantly reduced demand for firearms and ammunition products, as well as the general softness in consumer spending that many other retailers have described recently,” said Steven G. Miller, the company's Chairman, President and Chief Executive Officer. “While disappointed with the results, we are encouraged that year-over-year sales comparisons trended more favorably over the last several weeks of the second quarter and into the third quarter to date.”

Net sales reached $231.2 million in the quarter, compared to net sales of $239.9 million for the second quarter of fiscal 2013.
 
Same store sales declined 4.9 percent for the second quarter of fiscal 2014. For comparison purposes, the company's same store sales increased 4.4 percent for the second quarter of fiscal 2013 over the second quarter of the prior year. Sales results for the second quarter of fiscal 2014 reflect a continued reduction in demand for firearms, ammunition and related products, as well as general softness in the overall consumer environment. Second quarter sales also reflect the small unfavorable impact of the calendar shift of the Easter holiday, during which the company's stores were closed, out of the first quarter and into the second quarter this year.
 
Gross profit for the fiscal 2014 second quarter was $75.6 million, compared to $79.7 million in the second quarter of the prior year. The company's gross profit margin was 32.7 percent in the fiscal 2014 second quarter versus 33.2 percent in the second quarter of the prior year, reflecting a decrease in merchandise margins of 19 basis points and an increase in store occupancy costs resulting primarily from the opening of new stores. For comparison purposes, merchandise margins in the second quarter last year increased by 34 basis points versus the second quarter of fiscal 2012.
 
Selling and administrative expense as a percentage of net sales was 30.8 percent in the fiscal 2014 second quarter versus 28.8 percent in the second quarter of last year. Overall selling and administrative expense increased $1.9 million during the quarter from the prior year due primarily to higher employee labor and benefit-related expense, higher store-related expenses reflecting an increased store count, added costs related to the company's e-commerce initiative and a non-cash pre-tax impairment charge of $0.8 million related to certain underperforming stores.
 
Net income for the second quarter of fiscal 2014 was $2.5 million, or $0.11 per diluted share, including a non-cash impairment charge of $0.02 per diluted share and expenses associated with the development of the company's e-commerce platform of $0.01 per diluted share, compared to net income of $6.1 million, or $0.28 per diluted share, for the second quarter of fiscal 2013.
 
For the 26-week period ended June 29, 2014, net sales decreased to $462.4 million from net sales of $486.2 million in the comparable period last year. Same store sales decreased 6.4 percent in the first 26 weeks of fiscal 2014 versus the comparable period last year. For comparison purposes, the company's same store sales increased 7.4 percent for the first 26 weeks of fiscal 2013 over the comparable period in fiscal 2012. Net income was $4.6 million, or $0.21 per diluted share, including $0.02 per diluted share of non-cash impairment charges and $0.01 per diluted share of e-commerce development expenses, for the first 26 weeks of fiscal 2014, compared to net income of $13.6 million, or $0.62 per diluted share, for the first half of last year.
 
Quarterly Cash Dividend
The company's Board of Directors has declared a quarterly cash dividend of $0.10 per share, which will be paid on September 15, 2014 to stockholders of record as of August 29, 2014.
Share Repurchases
 
During the fiscal 2014 second quarter, pursuant to its share repurchase program, the company repurchased 63,012 shares of its common stock for a total expenditure of $0.8 million. As of June 29, 2014, the company had $8.4 million available for future share repurchases under its $20.0 million share repurchase program.
 
Guidance
For the fiscal 2014 third quarter, the company expects same store sales comparisons in the slightly negative to low positive single-digit range and earnings per diluted share in the range of $0.24 to $0.32. This guidance reflects the anticipated continued softness in demand for firearms, ammunition and related products and the challenging consumer environment. In addition, third quarter guidance includes approximately $0.01 per diluted share in anticipated expenses associated with the development of the company's e-commerce platform. For comparative purposes, the company's same store sales increased 1.4 percent and earnings per diluted share were $0.41, including $0.04 per diluted share for a charge for legal settlements, for the third quarter of fiscal 2013.
 
“Although third quarter sales comparisons are currently running down in the low single-digit range and continue to be impacted by the reduction in demand for firearm-related products, we believe that our efforts to improve our merchandise and promotional strategies should position us to produce positive same store sales over the balance of the quarter, particularly given that for much of the peak summer selling season in August last year, our sales were impacted by generally unfavorable summer weather conditions in many of our markets.” Miller said.
 
 
Store Openings

During the second quarter of fiscal 2014, the company opened two stores, ending the quarter with 427 stores in 12 states. During the fiscal 2014 third quarter, the company has closed two stores as part of relocations and anticipates opening four new stores. For the fiscal 2014 full year, the company currently anticipates opening approximately 12 net new stores.

 
The company's stores averages 11,000 square feet and offer a mix of athletic shoes, apparel and accessories, as well as a broad selection of outdoor and athletic equipment for team sports, fitness, camping, hunting, fishing, tennis, golf, winter and summer recreation and roller sports.
 

BIG 5 SPORTING GOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)
13 Weeks Ended 26 Weeks Ended
June 29, 2014 June 30, 2013 June 29, 2014 June 30, 2013
Net sales $ 231,150 $ 239,899 $ 462,413 $ 486,165
Cost of sales 155,577 160,226 314,162 326,017
Gross profit 75,573 79,673 148,251 160,148
Selling and administrative expense (1) 71,146 69,180 140,050 137,108
Operating income 4,427 10,493 8,201 23,040
Interest expense 371 418 805 871
Income before income taxes 4,056 10,075 7,396 22,169
Income taxes 1,521 3,971 2,801 8,551
Net income (1) $ 2,535 $ 6,104 $ 4,595 $ 13,618
Earnings per share:
Basic $ 0.12 $ 0.28 $ 0.21 $ 0.63
Diluted (1) $ 0.11 $ 0.28 $ 0.21 $ 0.62
Dividends per share $ 0.10 $ 0.10 $ 0.20 $ 0.20
Weighted-average shares of common stock outstanding:
Basic 21,985 21,714 21,982 21,583
Diluted 22,113 22,005 22,198 21,936
(1) In the second quarter of fiscal 2014, the Company recorded a pre-tax non-cash impairment charge of $0.8 million related to certain underperforming stores. This charge reduced net income by $0.5 million, or $0.02 per diluted share.