Big 5 Sporting Goods reported third-quarter earnings declined 26.8 percent but arrived at the high end of guidance. The retailer continues to be impacted by reduced demand for firearms and had already warned it would face challenges cycling some of the benefit from competitor store closures that occurred last year.
Reported net sales in the third quarter ended October 1 were $270.5 million compared to net sales of $279 million for the third quarter of fiscal 2016. Same-store sales decreased 2.9 percent for the third quarter of fiscal 2017. This compares to a 6.8 percent increase in same-store sales for the third quarter of fiscal 2016. As anticipated, fiscal 2017 third quarter sales comparisons to the prior year reflect a small benefit from the calendar shift related to the Fourth of July holiday.
Gross profit for the fiscal 2017 third quarter was $87.5 million, compared to $89.9 million in the third quarter of the prior year. The company’s gross profit margin was 32.4 percent in the fiscal 2017 third quarter versus 32.2 percent in the third quarter of the prior year, reflecting an increase in merchandise margins of 51 basis points partially offset by higher store occupancy expense as a percentage of sales.
Selling and administrative expense as a percentage of net sales was 28.6 percent in the fiscal 2017 third quarter versus 27.3 percent in the third quarter of the prior year. Overall selling and administrative expense for the quarter increased by $1.1 million from the prior year, primarily due to higher employee labor and benefit-related expense and expense related to information technology systems and services.
Net income for the third quarter of fiscal 2017 was $6 million, or 28 cents per diluted share, compared to net income for the third quarter of fiscal 2016 of $8.2 million, or 38 cents per diluted share. Results for the third quarter of fiscal 2016 included a charge of 3 cents per diluted share for store closing costs.
When it reported second-quarter results on August 1, Big 5 said it expected same-store sales to be in the negative low-single-digit range and earnings per diluted share to be in the range of 22 to 32 cents.
For the 39-week period ended October 1, 2017, net sales were $766.7 million compared to net sales of $755 million in the first 39 weeks of last year. Same-store sales increased 1.6 percent in the first 39 weeks of fiscal 2017 versus the comparable period last year. Net income for the first 39 weeks of fiscal 2017 was $14.1 million, or 65 cents per diluted share, compared to net income for the first 39 weeks of fiscal 2016 of $9.2 million, or 42 cents per diluted share, including 7 cents per diluted share of charges for store closing costs and the write-off of deferred tax assets related to share-based compensation.
“Our third quarter results were in line with our guidance,” said Steven G. Miller, the company’s chairman, president and chief executive officer. “Given the challenging and competitive retail environment, we are pleased to have retained a significant portion of the market share gains that we achieved following last year’s competitor store closures in our markets. While our third quarter same store sales declined from the prior year, we achieved two-year stacked quarterly same store sales growth for the period of 3.8 percent. For the third quarter, same store sales in our hardgoods category declined in the mid-single-digit range, reflecting the continued reduced demand for firearm-related products, and same store sales in our apparel and footwear categories were slightly down. Despite a highly promotional retail environment, we are also pleased to have grown merchandise margins as we benefited from a shift in our product mix.”
Miller added, “Looking toward the fourth quarter, while consumer spending over the holiday season and winter weather conditions in our markets are difficult to predict, we feel that our business model, which focuses on offering the optimal mix of value, selection, service and convenience to our customers, will continue to serve us well in the current environment.”
Quarterly Cash Dividend
The company’s Board of Directors has declared a quarterly cash dividend of 15 cents per share of outstanding common stock, which will be paid on December 15, 2017 to stockholders of record as of December 1, 2017.
During the fiscal 2017 third quarter, pursuant to its share repurchase program, the company repurchased 666,609 shares of its common stock for a total expenditure of $6.8 million. For the year-to-date period through October 1, 2017, the company repurchased 677,109 shares of its common stock for a total expenditure of $6.9 million. As of October 1, 2017, the company had $16.5 million available for future repurchases under its $25 million share repurchase program.
For the fiscal 2017 fourth quarter, the company expects same-store sales to be in the negative lo- single-digit range and earnings per diluted share to be in the range of 16 to 28 cents per share, compared to a same-store sales increase of 3.1 percent and earnings per diluted share of 35 cents, including 2 cents per diluted share for a tax benefit related to share-based compensation, in the fourth quarter of fiscal 2016.
During the third quarter of fiscal 2017, the company closed one store, ending the quarter with 432 stores in operation. The company anticipates opening three stores in the fourth quarter. For the fiscal 2017 full year, the company currently anticipates opening six new stores and closing three stores.
Photo courtesy Big 5 Sporting Goods