By Thomas J. Ryan
Believing it’s continuing to capitalize on the exit of Sports Authority and Sport Chalet from its markets, Big 5 Sporting Goods Corp. (Nasdaq:BGFV) said its fourth-quarter earnings would arrive at the upper end of its guidance.
The company now expects in the range of 34 cents to 35 cents a share, which compares to prior guidance of 25 cents to 35 cents. With the new range, earnings are expected to vault in the period by 70 percent to 75 percent versus year-ago earnings of 20 cents a share.
Revenues in the quarter ended December 31 were down 3.2 percent to $266.3 million due to the latest period running 13 weeks versus a 14-week period a year ago. Same-store sales – using comparable 13-week periods – rose 3.1 percent. Merchandise margins increased approximately 70 basis points in the latest quarter.
In a statement, Steven Miller, the company’s chairman, president and CEO, said the improvement came despite an overall “challenging retail environment” over the holiday selling period.
“Our ongoing efforts to capitalize on the competitive rationalization in the retail sporting goods sector contributed to increases in both customer transactions and average sale for the period,” said Miller. “We achieved these increases while also significantly improving our merchandise margins, which has enabled us to narrow our earnings guidance for the period toward the high end of our previous range.”
Big 5 officials had previously said that roughly 210 Sports Authority and Sport Chalet stores had been within the general trading area of a Big 5 store, impacting approximately 250 Big 5 stores, or nearly 60 percent of the chain. On its third-quarter conference call, Big 5 also indicated it was continuing to implement efforts to reach former Sports Authority and Sport Chalet customers while also saying it was benefiting from a less promotional environment and additional opportunistic buys that was partly a result of the competitor closings.
Among categories, hardgoods comped up mid single digits in the fourth quarter while apparel comped up in the low-single-digit range. Footwear comped slightly down. Inventories ended the period in “very good shape” with per-store inventories down approximately 1 percent versus the prior year.
Big 5 also noted that its positive cash flow allowed the company to reduce year-over-year borrowings under its credit facility by 82 percent from $54.8 million to $10 million at year end.
Miller concluded, “We are encouraged that the positive sales trends have continued into the start of 2017 as we continue to benefit from both the competitive store closures that occurred last year as well as the favorable winter weather conditions that began near the end of the fourth quarter and have continued throughout most of our Western markets.”
For the full year, the company now expects EPS in the range of 76 cents to 77 cents, up from 70 cents a year ago. The year-ago period included 7 cents per share of charges for expenses associated with the company’s proxy contest, a legal settlement, expenses related to evaluating store growth strategies and potential profit improvement opportunities and non-cash impairment. Sales inched down 0.9 percent to $1.02 billion due to one less week in the latest period. Same-store sales increased 1.7 percent.
The company expects to issue earnings results for the fourth quarter and full year by the end of February.
Among other retailers in the active lifestyle space reporting holiday results so far, Lululemon raised its guidance while Genesco, the parent of Journeys and Lids, indicated earnings would reach the high end of its previous range. Shoe Carnival, Kohl’s and Macy’s all recently lowered their guidance.
Photo courtesy Big 5 Sporting Goods
