Big 5 Sporting Goods Corp. reported first-quarter loss as gross margins eroded 200 basis points and same-store sales fell 7.5 percent. The sales decline was due to warm and dry weather conditions in the western states. The results were in line with guidance given in February.
Net sales for the fiscal 2018 first quarter were $234.2 million compared to net sales of $252.6 million for the first quarter of fiscal 2017. Same-store sales decreased 7.5 percent for the first quarter of fiscal 2018. This compares to a 7.9 percent increase in same store sales for the first quarter of fiscal 2017. Sales comparisons to the prior year reflect a small negative effect from the calendar shift of the Easter holiday, during which the company’s stores are closed, out of the second quarter of fiscal 2017 and into the first quarter of fiscal 2018.
Gross profit for the fiscal 2018 first quarter was $72.7 million, compared to $83.6 million in the first quarter of the prior year. The company’s gross profit margin was 31.1 percent in the fiscal 2018 first quarter versus 33.1 percent in the first quarter of the prior year, reflecting a decrease in merchandise margins of 58 basis points and higher store occupancy expense as a percentage of net sales. For comparison purposes, merchandise margins increased by 228 basis points in the first quarter of last year.
Selling and administrative expense as a percentage of net sales was 31.4 percent in the fiscal 2018 first quarter versus 29.5 percent in the first quarter of the prior year. Overall selling and administrative expense for the quarter decreased $1.1 million from the prior year primarily due to lower advertising expense.
Net loss for the first quarter of fiscal 2018 was $1.3 million, or 6 cents per share, including a charge of 1 cent per share for the write-off of deferred tax assets related to share-based compensation. For the first quarter of fiscal 2017, net income was $5.3 million, or 24 cents per diluted share.
On February 28 when the company reported fourth-quarter results, Big 5 expected same-store sales for the first quarter to land in the negative high single-digit range and loss per share to be in the range of 6 to 14 cents.
“Given the extraordinarily challenging conditions that our business faced during the quarter, we are pleased that our bottom line came in at the top end of the guidance range that we provided in February,” said Steven G. Miller, the company’s chairman, president and chief executive officer. “As we have reported, unfavorable record warm and dry weather conditions in our markets this year, compared to extremely favorable winter weather last year, led to very weak sales over the first seven weeks of the quarter. Over the balance of the period, generally cooler and wetter weather drove exceptional late-season winter product sales, but at a significant expense to spring-related product categories. We experienced improved trending of both sales and product margins over each month of the quarter.”
Miller continued, “Our sales and margin improvements have continued into the second quarter to date. While the first half of the second quarter is a relatively low volume period, we believe that we are well positioned for the key selling period of the quarter, which includes Memorial Day, Father’s Day and the start of the summer season.”
Quarterly Cash Dividend
The company’s Board of Directors has declared a quarterly cash dividend of $0.15 per share of outstanding common stock, which will be paid on June 15, 2018 to stockholders of record as of June 1, 2018.
During the fiscal 2018 first quarter, pursuant to the share repurchase program, the company repurchased 75,748 shares of common stock for a total expenditure of $0.4 million. As of April 1, 2018, the company had $15.3 million available for future repurchases under its $25.0 million share repurchase program.
For the fiscal 2018 second quarter, the company expects same-store sales to be in the flat-to-positive low-single-digit range and earnings per diluted share to be in the range of $0.04 to $0.12, compared to a same-store sales increase of 0.8 percent and earnings per diluted share of $0.13 in the second quarter of fiscal 2017.
During the first quarter of fiscal 2018, the company did not open or close any stores. During the fiscal 2018 second quarter, the company anticipates opening two stores and closing two stores, including one closure related to a relocation. For the fiscal 2018 full year, the company currently anticipates opening approximately eight new stores and closing approximately three stores.
Photo courtesy Big 5 Sporting Goods