Big 5 Sporting Goods Corp. reported Q4 comps slid 4.7%, calling it “by far our weakest quarterly comp store sales performance since 1995.” Net sales decreased 1% to $232.1 million from $234.5 million last year. Fourth quarter EPS are now expected in the range of 25 cents to 28 cents per share, sharply off previous guidance calling for earnings between 36 cents and 46 cents per share.
On a conference call, Steve Miller, CEO and chairman of Big 5 Sporting Goods, said the company expected sales would be tough, particularly in the areas most affected by housing-related issues, such as California, Nevada and Arizona, and difficulties comping against a strong wheeled footear business in the prior year quarter. But these factors “had a more dramatic impact” than anticipated during the holiday season.
Product margins were down 35 basis points. Both the average ticket and traffic were down in the low single-digit range, with a more significant decline in traffic than average ticket.
Looking at categories, wheeled footwear accounted for approximately 45% of the comp sales decline. While expected to comp negative for the holidays, the category, dominated by Heelys, “turned out to be even worse than anticipated.” One other particularly weak area was winter products, which is generally counted on for a few “holiday standouts,” but was hurt this year by a lack of cold weather until late in the quarter. Additional weaker performing categories also included general apparel, basketball and golf. On the positive side, exercise and game categories saw strength. Footwear, excluding roller shoes, comped positively, in the low-single-digits.
Given the softness, year-end inventory levels were above plan. Apart from the roller shoe category, Big 5 doesnt expect the process of right-sizing its inventory to meaningfully impact future margins. However, it expects sales and margins to continue to be impacted by the roller shoe category during 2008, particularly during the first half.
