Big 5 Sporting Goods Q1 Results Hurt By Tough Economy, Rising Insurance Costs

“We believe many of our consumers reduced purchases of discretionary items in response to the challenging economic environment, characterized by rising gas prices and high unemployment, said Steven G. Miller, Big 5 chairman, president and CEO. We are now taking what I would call more aggressive steps to enhance merchandise pricing and promotions.

BGFV reported revenues reached $221.1 million in the fiscal first quarter, up just 1.2 percent from the year-ago quarter. Same-store sales decreased 0.9 percent in the period versus a same-store sales increase of 2.4 percent in the first quarter of 2010. Customer traffic declined in the low-single-digit range while the average ticket rose by roughly the same amount.  Miller said performance was similar across multiple markets regardless of competition.

Gross margin slipped 10 basis points to 32.6 percent, as a 12 point increase in merchandise margins failed to fully offset the cost of operating more stores.

SG&A expenses rose 160 basis points to 30.4 percent of net sales from a year earlier. An increase of $4.2 million was attributed mainly to the higher store count, but roughly $1.5 million came from higher employee benefit costs.  While the company expected medical costs to grow in the high-single-digits, they grew in the mid-teens and workers comp and health insurance claims exceeded expectations.

Net income fell 44.0 percent to $2.8 million, or 13 cents per share, in the first quarter, compared to net income of $5.0 million, or 23 cents per share, for the first quarter of fiscal 2010.

Inventory per store rose 4.7 percent at quarters end, compared to the 7.8 percent increase for the year ended Jan. 2. 

BGFV expects same-store sales to come in flat to slightly negative in the second quarter and is forecasting earnings per diluted share will be in 6 to 14 cent range, compared to 22 cents in the second quarter of 2010.