Big 5 Sporting Goods reported a better-than-expected quarterly profit on tighter cost control and forecast third-quarter profit above Wall Street expectations. The Q209 comp gain reversed six straight quarters of comp declines.
A slight improvement in traffic was seen while its average ticket remained virtually unchanged. Sales comped positively in March, April and May but were down in the low single-digits in June due to below-average temperatures in most key markets and a “somewhat lackluster” Father's Day. Hardgoods were up low-to-mid-single digits in the quarter due to “relative strength” in its outdoor categories. Footwear was down low-single digits, apparel down high single digits.
Gross margins improved to 33% from 32.7% due mainly to lower store occupancy costs resulting from a one-time pretax charge of $1.5 million recorded in Q208. Merchandising margins were down 85 basis points in the latest quarter due primarily to shifts in its product sales mix and inflationary pressures.
SG&A eroded to 29.2% of sales from 30.8%, largely due to the reduced frequency and distribution of advertising circulars. On a per store basis, inventories were down approximately 6% versus the prior year. Debt was reduced $31 million on a year-over-year basis.
Looking at the third quarter, Steven Miller, Big 5's chairman and CEO said on a conference call that comps have been positive so far and product margins have experienced “nice improvement.” He added, “Clearly, we have benefited from favorable summer weather in many of our markets.”
Big 5 now expects Q309 earnings between 27 cents to 34 cents a share, up from 21 cents a year ago. Wall Street's consensus estimate had 23 cents. Despite the troubles at CIT Group-its biggest lender-Big 5 expects its balance sheet along with commitments from other lenders to be sufficient to fund cash requirements “for at least the next twelve months.”
