Big 5 Sporting Goods reported earnings in the fourth quarter surged 80 percent to $7.7 million, or 35 cents a share, thanks to improved merchandising margins and a 3.1 percent gain in same-store sales.
On January 17, the sporting goods chain reported its sales results while lifting its guidance for the quarter, calling for earnings in a range of 34 to 35 cents a share, up from a range of 25 to 35 cents previously.
Net sales for the fiscal 2016 fourth quarter ended January 1 were $266.3 million compared to net sales of $275 million for the fourth quarter of fiscal 2015. Same-store sales increased 3.1 percent for the fourth quarter of fiscal 2016.
As a result of the fiscal year calendar, the fiscal 2016 fourth quarter included 13 weeks and the fiscal 2016 full year included 52 weeks, compared to 14 weeks and 53 weeks for the respective reporting periods in fiscal 2015. For purposes of reporting same-store sales comparisons to fiscal 2015, the company uses comparable 13-week and 52-week periods.
Gross profit for the fiscal 2016 fourth quarter was $87.3 million, compared to $85.8 million in the fourth quarter of the prior year. The company’s gross profit margin was 32.8 percent in the fiscal 2016 fourth quarter versus 31.2 percent in the fourth quarter of the prior year, reflecting an increase in merchandise margins of 68 basis points and a decrease in store occupancy and distribution costs as a percentage of net sales.
Selling and administrative expense as a percentage of net sales was 28.2 percent in the fiscal 2016 fourth quarter versus 28.5 percent in the fourth quarter of the prior year. Overall selling and administrative expense for the quarter decreased $3.2 million from the prior year primarily due to the extra week in the fourth quarter of fiscal 2015 and lower advertising expense.
Net income for the fourth quarter of fiscal 2016 was $7.7 million, or 35 cents per diluted share, including 2 cents per diluted share for a tax benefit related to share-based compensation, compared to net income for the fourth quarter of fiscal 2015 of $4.3 million, or 20 cents per diluted share, including 2 cents per diluted share of expense related to evaluating store growth strategies and potential profit improvement opportunities and non-cash impairment.
For the 52-week fiscal 2016 full year, net sales were $1.02 billion, compared to net sales of $1.03 billion for the 53-week fiscal 2015 full year. Same-store sales increased 1.7 percent in fiscal 2016 from the prior year. Net income for fiscal 2016 was $16.9 million, or 77 cents per diluted share, including 5 cents per diluted share of charges for store closing costs and the net write-off of deferred tax assets related to share-based compensation. Net income for fiscal 2015 was $15.3 million, or 70 cents per diluted share, including 7 cents per diluted share of charges for expense associated with the company’s publicly disclosed proxy contest, a legal settlement, evaluating store growth strategies and potential profit improvement opportunities and non-cash impairment.
“We are pleased to report a strong finish to fiscal 2016, with solid same store sales, expanded gross margins, expense leverage and meaningful earnings growth in a challenging holiday sales environment,” said Steven G. Miller, the company’s chairman, president and chief executive officer. “As we previously reported, our fourth quarter benefited from the competitive rationalization in the retail sporting goods sector, and we increased both customer transactions and average sale as well as improved merchandise margins. We also are pleased to have further strengthened our balance sheet, as our healthy operating cash flow for the year of $73.7 million allowed us to significantly reduce year-over-year borrowings under our credit facility and return over $13 million to shareholders through cash dividends and stock repurchases.”
Miller added, “For the first quarter to date, our same store sales are up in the mid-single-digit range, largely driven by strong demand for winter products as a result of very favorable winter weather conditions throughout most of our Western markets. We also continue to benefit from the competitive store closures, both from a sales and margin standpoint. We believe we are well positioned with our merchandise assortment for the spring selling season as we remain focused on providing our customers with the optimal mix of value, selection, service and convenience.”
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 March 20, 2017 to stockholders of record as of March 6, 2017.
Guidance
For the fiscal 2017 first quarter, the company expects same store sales to be in the positive mid-single-digit range and earnings per diluted share to be in the range of 12 to 18 cents a share, compared to a same store sales decrease of 1.9 percent and a loss of 5 cents per share in the first quarter of fiscal 2016.
Store Openings
During the fourth quarter of fiscal 2016, the company opened one new store and closed one store, ending fiscal 2016 with 432 stores in operation. During the fiscal 2017 first quarter, the company relocated one store and will close one store. For the fiscal 2017 full year, the company currently anticipates opening approximately eight new stores and closing approximately three stores.
Photo courtesy Big 5 Sporting Goods
