Big 5 Sporting Goods Corporation recorded a 2.9% increase in second quarter sales to $217.8 million from $211.8 million for the second quarter of fiscal 2006. Same store sales, however, declined 0.2% for the quarter, representing the company's first quarterly decrease in same store sales in over eleven years.
Gross profit for the fiscal 2007 second quarter increased to $77.1 million from $76.7 million in the second quarter of the prior year. The company's gross profit margin was 35.4% in the fiscal 2007 second quarter versus 36.2% in the second quarter of the prior year. The gross margin performance reflected product margins generally in-line with the prior year and a $0.4 million decrease in distribution center costs as a result of operational efficiencies realized in the company's new distribution center, offset by a $0.9 million reduction in inventory cost capitalization from the second quarter of last year.
Selling and administrative expenses as a percentage of net sales were 28.3% in the fiscal 2007 second quarter compared to 27.7% in the second quarter of last year, primarily reflecting softness in the company's sales and an increase in administrative expenses to support the company's overall growth and financial reporting initiatives.
Net income for the second quarter decreased 20.3% to $5.9 million, or 26 cents per diluted share, versus net income of $7.4 million, or 33 cents per diluted share, for the second quarter of fiscal 2006.
For the twenty-six week period ended July 1, 2007, net sales increased $15.9 million, or 3.8%, to $434.9 million from net sales of $419.0 million in the same period last year. Same store sales increased 0.3% in the first 26 weeks of fiscal 2007 versus the same period last year. Net income was $13.5 million, or 59 cents per diluted share, for the first 26 weeks of fiscal 2007, compared to net income of $13.4 million, or 59 cents per diluted share, in the same period last year.
“As we previously announced, a general softness in the macro-economic environment impacted our sales throughout the second quarter,” said Steven G. Miller, the company's chairman, president and CEO. “While we increased our promotional activity slightly and generated positive same store sales in May and June, those increases were not enough to offset weakness earlier in the quarter. From a product standpoint, our hardgoods category comped slightly positive during the second quarter, our footwear category was slightly down and apparel was our softest category, comping down in the low single digits.
“The start of the third quarter continues to be affected by the challenging consumer environment as well as soft sales comparisons of product categories that perform best in warmer weather due largely to significantly cooler weather than last year in many of our west coast markets,” continued Mr. Miller. “We are cautiously optimistic about our opportunities for the remainder of the quarter. We have a strong promotional plan and believe we are well-positioned from a product offering and inventory perspective, and we are encouraged by the strength we are seeing in a number of product categories not impacted by the cooler temperatures. We remain confident in the effectiveness of our overall business model and continue to look for ways to enhance our top and bottom line performance in the current environment.”
Quarterly Cash Dividend
The company's Board of Directors has declared a quarterly cash dividend of 9 cents per share of outstanding common stock, which will be paid on September 14, 2007 to stockholders of record as of August 31, 2007.
Share Repurchases
During the 2007 second fiscal quarter and third fiscal quarter through July 31, 2007, the company repurchased 215,100 shares of its common stock for a total expenditure of $5.0 million. Since the inception of the company's share repurchase program, which had an initial authorization of $15.0 million, the company has repurchased a total of 280,110 shares, for a total expenditure of $6.3 million.
Guidance
For the third quarter of fiscal 2007, the company expects to realize same store sales growth in the low single-digit negative to low single-digit positive range and earnings per diluted share in the range of 27 cents to 35 cents. Third quarter guidance assumes that sales will continue to be challenged by macro-economic issues affecting the consumer environment and, compared to the prior year, reflects higher administrative expenses to support the company's overall growth and financial reporting initiatives. For the fiscal 2007 full year, the company expects to realize same store sales growth in the low single-digit negative to low single-digit positive range and earnings per diluted share in the range of $1.22 to $1.42. Full year guidance assumes that sales will continue to be challenged by macro-economic issues affecting the consumer environment and, compared to the prior year, reflects lower distribution center expenses offset by a reduction in inventory cost capitalization and higher administrative expenses to support the company's overall growth and financial reporting initiatives.
Store Openings
During the fiscal 2007 second quarter, the company opened four new stores, including a relocation of a store that the Company had closed during the first quarter, bringing its total store count as of the end of the second quarter to 348 stores. The company anticipates opening five new stores, including one relocation, during the fiscal 2007 third quarter. The company anticipates opening approximately 20 new stores, net of relocations, during fiscal 2007.
BIG 5 SPORTING GOODS CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)13 Weeks Ended 26 Weeks Ended
July 1, July 2, July 1, July 2,
2007 2006 2007 2006Net sales $217,846 $211,806 $434,853 $418,987
Cost of goods sold, buying and
occupancy, excluding
depreciation and amortization
shown separately below 140,784 135,094 279,747 268,848Gross profit 77,062 76,712 155,106 150,139
Operating expenses:
Selling and administrative 61,601 58,571 121,473 115,963
Depreciation and amortization 4,166 4,004 8,372 8,404Total operating expenses 65,767 62,575 129,845 124,367
Operating income 11,295 14,137 25,261 25,772
Interest expense 1,473 1,869 2,922 3,698
Income before income taxes 9,822 12,268 22,339 22,074
Income taxes 3,879 4,837 8,809 8,700
Net income $5,943 $7,431 $13,530 $13,374
Dividends per share declared $0.09 $0.09 $0.18 $0.16
Earnings per share:
Basic $0.26 $0.33 $0.60 $0.59Diluted $0.26 $0.33 $0.59 $0.59
Weighted-average shares of common
stock outstanding:
Basic 22,691 22,707 22,683 22,705Diluted 22,847 22,807 22,825 22,805
