Big 5 Sporting Goods Corp reported net sales increased 4.7% to $217 million from $207.2 million for the first quarter. Same store sales increased 1%. Net income jumped 28.8% to $7.6 million, or 33 cents a share, from $5.9 million, or 26 cents, a year ago.
Gross profit for the fiscal 2007 first quarter increased 6.3% to $78.0 million from $73.4 million in the first quarter of the prior year. The Company's gross profit margin improved to 36.0% in the fiscal 2007 first quarter from 35.4% in the first quarter of the prior year. The margin improvement was driven by an increase of approximately 80 basis points in product selling margins, which benefited from sales of winter-related products earlier in the quarter at higher margins than the prior year, and a $2.2 million decrease in distribution center costs due to facility transition costs incurred in the prior year. These improvements were partially offset by a $2.4 million reduction in inventory cost capitalization from the first quarter of the prior year.
Selling and administrative expense as a percentage of net sales improved to 27.6% in the fiscal 2007 first quarter from 27.7% in the first quarter of last year. This improvement was driven primarily by a $1.3 million decrease in audit and legal fees due to additional expenses incurred in the prior year to complete the Company's financial statement and internal control audits, and the Company's leveraging of store-related expenses. These benefits were partially offset by a $1.1 million increase in advertising expense primarily to support the Company's sales and store growth.
Quarterly Cash Dividend
The Company's Board of Directors has declared a quarterly cash dividend of $0.09 per share of outstanding common stock, which will be paid on June 15, 2007 to stockholders of record as of June 1, 2007.
Guidance
For the second quarter of fiscal 2007, the Company expects to realize same store sales growth in the flat to low single-digit range and earnings per diluted share in the range of $0.25 to $0.33. Second quarter earnings guidance reflects lower than anticipated sales beginning in the second half of April 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 financial reporting initiatives. The Company continues to expect full-year same store sales growth in the low single-digit range and full-year earnings per diluted share in the range of $1.47 to $1.57.
Store Openings
During the fiscal 2007 first quarter, the Company opened three new stores, including one relocation, and closed an additional store in preparation for its relocation during the second quarter. The Company operated 344 stores at the end of the first quarter and anticipates opening four new stores during the fiscal 2007 second quarter. The Company anticipates opening approximately 20 new stores, net of relocations, during fiscal 2007.
“We are pleased to have begun the year with a very strong earnings performance,” said Steven G. Miller, the Company's Chairman, President and Chief Executive Officer. “We achieved sales and product margin gains in each of our three major merchandise categories of footwear, hard goods and apparel, while comping against our strongest quarterly same store sales performance of last year. Product margins benefited from strong sales of winter-related products early in the quarter, when margins are highest, compared to last year, when we realized very strong winter product sales late in the quarter.”
Commenting on second quarter sales trends, Mr. Miller added, “While sales over the first two weeks of the second quarter were positive, they began to soften in the second half of April. We are continuing to evaluate the factors that may be contributing to these lower than anticipated sales levels. The back half of the second quarter, which includes Memorial Day, Father's Day and pre-Fourth of July sales, is by far the most important part of the quarter. We believe we are well positioned with a strong merchandise and promotional plan for this period.”
