Big 5 Sporting Goods Exceeds Q3 Earnings Guidance

As anticipated, third quarter sales reflect a modest benefit over the prior year from the calendar shift of the Fourth of July holiday, which resulted in certain holiday-related sales moving from the second quarter to the third quarter for 2012.
 
Gross profit for the fiscal 2012 third quarter increased to $83.9 million from $77.0 million in the third quarter of the prior year. The Company's gross profit margin was 33.3 percent in the fiscal 2012 third quarter, up 50 basis points from the third quarter of the prior year. The increase in gross profit margin reflects an increase in merchandise margins of 25 basis points and the leveraging of store occupancy and distribution costs.
 
Selling and administrative expense as a percentage of net sales improved to 27.9 percent in the fiscal 2012 third quarter, down 110 basis points from the third quarter of the prior year. Overall selling and administrative expense increased $2.9 million during the quarter from the prior year due primarily to higher store-related expenses reflecting an increased store count, increased employee benefit-related costs and a pre-tax charge of $400,000 related to the closing of one store.
 
Net income for the third quarter of fiscal 2012 was $8.2 million, or 38 cents per diluted share, including a store closing charge of a penny per diluted share, versus net income of $5.8 million, or 27 cents per diluted share, for the third quarter of fiscal 2011.
 
For the 39-week period ended Sept. 30, 2012, net sales increased to $696.9 million from net sales of $675.4 million in the 39 weeks ended Oct. 2, 2011. Same store sales increased 1.2 percent in the first 39 weeks of fiscal 2012 versus the comparable period last year. Net income was $10.9 million, or 50 cents per diluted share, including $0.04 of store closing and non-cash impairment charges, for the first 39 weeks of fiscal 2012, compared to net income of $11.7 million, or 53 cents per diluted share, including a 2 cent non-cash impairment charge, for the comparable period last year.
 
“We are extremely pleased with our third quarter results, which built on the positive momentum in the second quarter and exceeded our earnings guidance,” said Steven G. Miller, chairman, president and CEO. “We experienced improvement in both customer traffic and average sale, as well as expanded merchandise and operating margins. The strength of our performance was broad-based, as same store sales increased in each of our geographic regions and across all of our major product categories of apparel, footwear and hardgoods. We believe our business has continued to benefit from the merchandise and marketing initiatives that we have implemented over the last year. Additionally, our summer product sales benefited from relatively favorable weather compared to the prior year.”
 
“We believe our third quarter results illustrate our ability to meaningfully leverage expenses and drive earnings growth as our sales improve,” continued Miller. “Along with our strong sales and margin results, we reduced inventory levels per-store at quarter end by 3.7 percent versus the prior year. Our year-to-date operating cash flow at the end of the third quarter improved over $40 million compared to the prior year, and our debt levels declined by $16.5 million or 23.9 percent year over year.”
 
Miller concluded, “We are encouraged that the positive sales trends have continued into the fourth quarter and are excited about our holiday product assortment and marketing plans. We remain focused on continuing to drive the business by broadening our appeal to include consumers with more discretionary income while maintaining our strong value proposition, and further leveraging our merchandise and operating improvements.”

BIG 5 SPORTING GOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
	13 Weeks Ended		39 Weeks Ended
	September 30, 2012	October 2, 2011	September 30, 2012	October 2, 2011
Net sales	$ 251,774	$ 234,680	$ 696,882	$ 675,411
Cost of sales	167,901	157,691	472,505	454,497
Gross profit	83,873	76,989	224,377	220,914
Selling and administrative expense (1) (2)	70,384	67,484	205,560	201,590
Operating income	13,489	9,505	18,817	19,324
Interest expense	469	632	1,645	1,838
Income before income taxes	13,020	8,873	17,172	17,486
Income taxes	4,851	3,056	6,289	5,804
Net income	$ 8,169	$ 5,817	$ 10,883	$ 11,682
Earnings per share:
Basic	$ 0.38	$ 0.27	$ 0.51	$ 0.54
Diluted	$ 0.38	$ 0.27	$ 0.50	$ 0.53