Big 5 Sporting Goods Corporation saw net sales increase $16.4 million, or 7.9%, to $223.3 million from net sales of $206.8 million for the third quarter of fiscal 2005. Same store sales increased 3.8% for the third quarter, representing the company's 43rd consecutive quarter of positive same store sales comparisons.
Gross profit for the fiscal 2006 third quarter increased 5.6% to $77.7 million from $73.5 million in the third quarter of the prior year. The company's gross profit margin was 34.8% in the third quarter of fiscal 2006 versus 35.6% in the third quarter of the prior year, primarily reflecting higher distribution center costs over the prior year in connection with the company's operation of a new larger distribution center and a significantly lower benefit from inventory cost capitalization than the company experienced last year.
Selling and administrative expenses as a percentage of sales improved to 26.4% in the fiscal 2006 third quarter from 27.9% in the third quarter of last year. The year-over-year improvement was primarily due to the company's leveraging of store-related expenses during the quarter, a reduction in legal and audit fees resulting from additional expense in the third quarter of last year related to the company's restatement of prior period financial statements and the recording of co-op advertising cost reimbursements from vendors for fiscal 2006 earlier in the year.
Net income for the third quarter of fiscal 2006 increased to $7.8 million, or 34 cents per diluted share, from net income of $7.2 million, or 32 cents per diluted share, for the third quarter of fiscal 2005. Results for the third quarter of fiscal 2006 include a pre-tax charge of $0.6 million ($0.4 million after-tax), or $0.02 per diluted share, for the expensing of stock options. Results for the fiscal 2005 third quarter benefited from the company's receipt of $1.8 million in settlement proceeds in an eminent domain action related to a company store.
For the thirty-nine week period ended October 1, 2006, net sales increased $47.2 million, or 7.9%, to $642.3 million from net sales of $595.1 million in the same period last year. Same store sales increased 4.0% in the first 39 weeks of fiscal 2006 versus the same period last year. Net income was $21.2 million, or $0.93 per diluted share, for the first 39 weeks of fiscal 2006, compared to net income of $19.8 million, or $0.87 per diluted share, in the same period last year. Results for the first 39 weeks of fiscal 2006 include pre-tax charges totaling $1.7 million ($1.0 million after-tax), or $0.04 per diluted share, for the expensing of stock options, and $1.8 million ($1.1 million after-tax), or $0.05 per diluted share, for costs incurred in the first quarter related to the transition to a new distribution center.
“We are pleased to report on the continued strong performance of our business,” said Steven G. Miller, the Company's Chairman, President and Chief Executive Officer. “Steady execution of our proven merchandising strategy enabled us to comp positively against our strongest quarterly same-store sales performance of fiscal 2005 and to achieve gains in each of our major merchandise categories of footwear, hard goods and apparel. Our positive sales and leverage of store-level and other expenses contributed to solid earnings results for the quarter. With our new distribution center continuing to increase efficiencies in our distribution and store-level operations, we believe that we are well positioned for the upcoming holiday season.”
Share Repurchase
During the fiscal 2006 third quarter, the company repurchased 64,310 shares of the company's common stock under the company's share repurchase program, for a total expenditure of $1.3 million. Following these repurchases, the company has $13.7 million of availability remaining under its $15.0 million share repurchase program.
Quarterly Cash Dividend
The company's Board of Directors has declared a quarterly cash dividend of $0.09 per share of outstanding common stock, which will be paid on December 15, 2006 to stockholders of record as of December 1, 2006.
Guidance
For the fourth quarter of fiscal 2006, the company expects to realize same store sales growth in the low to mid-single digit range and earnings per diluted share in the range of $0.34 to $0.40. This includes a charge of approximately $0.02 per diluted share for the expensing of stock options. The company expects full-year same store sales growth in the low to mid-single digit range and full-year earnings per diluted share in the range of $1.27 to $1.33. Full-year earnings guidance includes a charge of approximately $0.06 per diluted share for the expensing of stock options. Fourth quarter earnings guidance, compared to the same period last year, reflects the unfavorable impact of the recording of co-op advertising cost reimbursements from vendors for fiscal 2006 earlier in the year, as well as a significantly lower benefit from inventory cost capitalization than the Company experienced in the fourth quarter of fiscal 2005.
Store Openings
The company opened five new stores during the third quarter of fiscal 2006, bringing its store count at the end of the third quarter to 334 stores. The company has opened two new stores during the fiscal 2006 fourth quarter to date. The company anticipates opening a total of nine new stores during the fourth quarter, for a total of 19 new store openings during fiscal 2006.
BIG 5 SPORTING GOODS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except earnings per share data) 13 Weeks Ended October 1, 2006 October 2, 2005 Net sales $223,276 $206,834 Cost of goods sold, buying and occupancy, excluding depreciation and amortization, shown separately below 145,592 133,297 Gross profit 77,684 73,537 Selling and administrative 58,961 57,774 Depreciation and amortization 4,069 3,784 Operating income 14,654 11,979 Other income -- (1,409) Interest expense 1,709 1,425 Income before income taxes 12,945 11,963 Income tax 5,120 4,721 Net income $7,825 $7,242 Earnings per share: Basic $0.34 $0.32 Diluted $0.34 $0.32 Weighted average shares of common stock outstanding: Basic 22,692 22,678 Diluted 22,794 22,809