Big 5 Posts Strong Earnings Gains in Q1…

Big 5 Sporting Goods Corp shrugged off issues with less-than-favorable winter weather in the first quarter to start the year with fairly solid results. While the west coast retailer posted a same-store sales increase of just one percent for the period, they did manage to improve product and gross margins, and leverage selling and administrative expenses to post strong growth in net income for the quarter.

Steven Miller, BGFV president and CEO, said that sales gains were driven by a modest increase in both customer traffic and average transaction size. Footwear was the strongest performer for the quarter, comping up in the low-single-digits. Apparel and hardgoods were both up for the quarter as well, but were each up less than one percent for the period. Mr. Miller said that each of the major categories and the overall comp performance were impacted by lower sales of winter-related products than last year.

The timing of the winter-related slowdown resulted in a benefit for product margins this year, which were up about 80 basis points versus last year. This increase was due to strong winter sales at the start of the quarter when margins were better, compared to a slowdown in the mid- to latter-part of the quarter when margins were lower. A $2.2 million decrease in distribution center costs due to facility transition costs incurred in the prior-year quarter also added upside to the gross margin line, but was offset by a $2.4 million reduction in inventory cost capitalization from the first quarter of the prior year.

The retailer also saw improved productivity at the DC it opened last year, enabling them to transition to a five-day work week from a six-day week midway through the quarter.

BGFV opened three new stores in the first quarter, including one relocation, and closed another store in Monterey, Calif. in preparation for its relocation during the second quarter. The retailer had 344 stores in operation at the end of the period and expects to open four new stores during the second quarter. Big 5 anticipates opening approximately 20 new stores, net of relocations, for the full year.

Management warned that second quarter sales started to lag expectations in the back half of the month of April, but the retailer still expects comparable store sales to increase in the flat to low-single-digit range for the second quarter. Diluted EPS is expected to be in the range of 25 cents to 33 cents per share for the period.

Big 5 expects full-year comp sales growth in the low-single-digit range and full-year diluted EPS in the range of $1.47 to $1.57 per share.