Big 5’s Profits Drop 44 Percent in First Quarter

The comparable-store decline compared to a same store sales increase of 2.4 percent in the first quarter of 2010. Sales results in fiscal 2011 reflect a benefit over the prior year from the calendar shift of the Easter holiday, during which the comany’s stores are closed, out of the first quarter and into the second quarter this year.

Gross profit for the fiscal 2011 first quarter was $72.2 million, compared to $71.6 million in the first quarter of the prior year. The company’s gross profit margin was 32.6 percent in the fiscal 2011 first quarter versus 32.7 percent in the first quarter of the prior year. The slight gross profit margin decrease reflects an increase in store occupancy costs related to new store openings, partially offset by an increase in merchandise margins of 12 basis points.

Selling and administrative expense as a percentage of net sales was 30.4 percent in the fiscal 2011 first quarter versus 28.8 percent in the first quarter of the prior year. Overall selling and administrative expense increased $4.2 million during the quarter from the prior year due mainly to an increase in store-related expenses, which reflected a higher store count and increased employee benefit costs, as well as increased advertising expense.

“Our sales results for the first quarter were at the lower end of our guidance range and reflect continued macroeconomic weakness in our markets,” said Steven G. Miller, the company’s chairman, president and chief executive officer. “Sales were negatively impacted by a decrease in customer traffic, as 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. Earnings were lower than our previous expectations primarily due to higher than anticipated expenses associated with employee benefits, including workers compensation, health and welfare and California unemployment taxes.”

Miller continued, “Sales trends in the second quarter to-date remain challenging as we believe that our consumer continues to be highly sensitive to the adverse economic conditions prevalent in our markets, which are concentrated in the western United States. We continue to look at all aspects of our business in order to drive sales and earnings. We are taking steps to further enhance our merchandise, pricing, and promotional strategies, while remaining focused on operating as efficiently as possible. We believe that our continued emphasis on improving the execution of our overall business model will enable us to weather the current environment and position us well when the consumer climate improves.”

Quarterly Cash Dividend

The company’s Board of Directors has declared a quarterly cash dividend of $0.075 per share of outstanding common stock, which will be paid on June 15, 2011 to stockholders of record as of June 1, 2011.

Guidance

For the fiscal 2011 second quarter, the company expects same store sales in the flat to negative low single-digit range and earnings per diluted share in the range of $0.06 to $0.14. For comparative purposes, the company’s earnings per diluted share for the second quarter of fiscal 2010 were $0.22.

Store Openings

During the first quarter of fiscal 2011, the company opened two new stores, both of which were relocations, and closed two stores as part of relocations that began in late 2010. The company ended the fiscal 2011 first quarter with 396 stores and anticipates closing one store during the fiscal 2011 second quarter as part of a relocation that began in late 2010. Excluding stores closed as part of relocations that began last year, the company currently expects to open between 10 and 15 net new stores during fiscal 2011.