Big 5 Sporting Goods Corp had net sales of $219.6 million for the fourth quarter ended Dec. 28, compared to $232.1 million a year ago. Same store sales declined 8.6% due to a decrease in customer traffic as a result of the continuation of the challenging consumer environment. Net income slumped 42% to $3.6 million, or 17 cents a share, from $6.2 million, or 28 cents, the prior year.
Gross profit for the fiscal 2008 fourth quarter was $71.3 million, compared to $79.2 million in the fourth quarter of the prior year. The company's gross profit margin was 32.5% in the fiscal 2008 fourth quarter versus 34.1% in the fourth quarter of the prior year. The decrease in gross profit margin was driven primarily by a decline of approximately 50 basis points in product selling margins and deleveraging of store occupancy costs due to lower sales levels.
Selling and administrative expense as a percentage of net sales was 29.3% in the fiscal 2008 fourth quarter versus 28.8% in the fourth quarter of the prior year, primarily reflecting deleveraging of expenses as a result of lower sales volume. Overall selling and administrative expense declined $2.6 million during the quarter from the fourth quarter of the prior year, due to lower advertising, store-related and administrative expenses.
For the fiscal 2008 full year ended Dec. 28, 2008, net sales decreased $33.6 million, or 3.7%, to $864.7 million from net sales of $898.3 million for fiscal 2007. Same store sales decreased 7.0% in fiscal 2008 versus the prior year. Net income was $13.9 million, or 64 cents per diluted share, for fiscal 2008, compared to net income of $28.1 million, or $1.25 per diluted share, in fiscal 2007. Results for fiscal 2008 include a previously reported non-recurring pre-tax charge of $1.5 million, or 4 cents per diluted share, recorded in the second quarter to correct an error in the company's previously recognized straight-line rent expense, substantially all of which pertained to prior periods.
“In an increasingly difficult economic environment, we are pleased to report fourth quarter and full year earnings at the upper end of the guidance that we issued last November,” said Steven G. Miller, the company's chairman, president and CEO. “We believe these results reflect our operating discipline and ability to provide consumers with compelling values on quality products without significantly compromising our merchandise margins. During fiscal 2008 we focused on increasing operating efficiencies and managing our costs effectively as sales volume declined. As an example, through carefully managed attrition, we reduced our full-time company-wide headcount by approximately nine percent while operating 18 additional stores over the course of fiscal 2008 and continued to align our part-time store labor to sales levels.
“Recognizing that the economy is likely to remain challenging throughout 2009, we remain comfortable with our financial condition as we continue to take the steps we believe are necessary to effectively manage through this recessionary environment,” continued Miller. “We expect to further reduce our cost structure and manage our cash flow as business conditions warrant. We remain highly disciplined in our inventory management and are taking a conservative approach to new store growth. While we continue to explore opportunities for new locations, we expect to be very cautious in opening new stores until we have greater visibility of a broader economic turnaround.”
Quarterly Cash Dividend
Due to the nearly unprecedented downturn in the economy, the company's Board of Directors has determined to reduce the company's quarterly cash dividend to 5 cents per share of outstanding common stock, for an annual rate of 20 cents per share. This decision is consistent with the company's objective to utilize its capital to maintain a healthy financial condition during these challenging economic times. The quarterly cash dividend of 5 cents per share of outstanding common stock will be paid on Mar. 20, 2009 to stockholders of record as of Mar. 6, 2009.
Share Repurchases
During the fiscal 2008 fourth quarter, the company repurchased 25,000 shares of its common stock for a total expenditure of $0.2 million. As of the end of fiscal 2008, the company had approximately $14.2 million available for future stock repurchases under its $20.0 million share repurchase program authorized in the fiscal 2007 fourth quarter. Due to the current challenging economic environment, the company currently expects to reduce or discontinue share repurchases in fiscal 2009.
Guidance
Given the degree of uncertainty in the current economic environment, the company will not at this time provide annual same store sales guidance or annual earnings per share guidance for fiscal 2009. The company will currently provide forward quarter same store sales and earnings per share guidance.
The company's guidance for the first quarter of fiscal 2009 assumes that sales will continue to be impacted by the challenging consumer environment. For the fiscal 2009 first quarter, the Company expects a decline in same store sales in the high-single digit range and earnings per diluted share in the range of 1 cent to 7 cents. A material improvement or decline in the overall consumer environment could materially impact the company's performance relative to this guidance.
Store Openings
Big Five opened nine new stores during the fourth quarter of fiscal 2008, bringing its store count at the end of fiscal 2008 to 381 stores, from 363 stores at the end of fiscal 2007. The company expects the number of new store openings in fiscal 2009 to be substantially lower than fiscal 2008 due to the continued challenging consumer environment.
BIG 5 SPORTING GOODS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
December 28, December 30,
2008 2007
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ASSETS
Current assets:
Cash and cash equivalents $9,058 $9,741
Accounts receivable, net of allowances of
$305 and $405, respectively 16,611 14,927
Merchandise inventories, net 232,962 252,634
Prepaid expenses 8,201 7,069
Deferred income taxes 8,333 8,051
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Total current assets 275,165 292,422
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Property and equipment, net 94,241 93,244
Deferred income taxes 13,363 12,780
Other assets, net of accumulated amortization
of $293 and $241, respectively 1,155 1,044
Goodwill 4,433 4,433
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Total assets $388,357 $403,923
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $88,079 $95,310
Accrued expenses 55,862 62,429
Current portion of capital lease obligations 1,942 1,649
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Total current liabilities 145,883 159,388
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Deferred rent, less current portion 24,960 22,075
Capital lease obligations, less current portion 2,948 2,279
Long-term debt 96,499 103,369
Other long-term liabilities 6,267 7,657
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Total liabilities 276,557 294,768
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Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, authorized
50,000,000 shares; issued 23,004,087 and
22,894,987 shares, respectively; outstanding
21,520,792 and 22,012,691 shares, respectively 230 228
Additional paid-in capital 92,704 90,851
Retained earnings 40,232 34,137
Less: Treasury stock, at cost; 1,483,295 and
882,296 shares, respectively (21,366) (16,061)
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Total stockholders' equity 111,800 109,155
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Total liabilities and stockholders' equity $388,357 $403,923
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