Big 5 Sporting Goods reported earnings in its second quarter rose 33.3 percent on improving gross margins and a 0.8 percent gain in same-store sales. But sales were lower than expected due to weakness in certain outdoor product categories related to firearms, camping and water sports.

For the fiscal 2017 second quarter ended July 2, net sales were $243.7 million compared to net sales of $241.4 million for the second quarter of fiscal 2016. Same-store sales increased 0.8 percent for the second quarter of fiscal 2017, reflecting continued market share gains resulting from the closure of certain major competitors last year, but also lower demand for certain hardgoods product categories, primarily related to firearms, camping and water sports. As anticipated, sales comparisons to the prior year were negatively affected by calendar shifts related to the Easter and Fourth of July holidays.

Gross profit for the fiscal 2017 second quarter was $79.3 million, compared to $76.3 million in the second quarter of the prior year. The company’s gross profit margin was 32.5 percent in the fiscal 2017 second quarter versus 31.6 percent in the second quarter of the prior year, reflecting an increase in merchandise margins of 37 basis points and a decrease in distribution expense resulting from higher costs capitalized into inventory.

Selling and administrative expense as a percentage of net sales was 30.4 percent in the fiscal 2017 second quarter versus 29.9 percent in the second quarter of the prior year. Overall selling and administrative expense for the quarter increased by $1.9 million from the prior year primarily due to higher employee labor expense and expenses related to information technology systems and services.

Net income for the second quarter of fiscal 2017 was $2.8 million, or 13 cents per diluted share, compared to net income for the second quarter of fiscal 2016 of $2.1 million, or 10 cents per diluted share. Results for the second quarter of fiscal 2016 included a charge of 1 cent per diluted share for the write-off of deferred tax assets related to share-based compensation.

For the 26-week period ended July 2, 2017, net sales were $496.3 million compared to net sales of $475.9 million in the first 26 weeks of last year. Same store sales increased 4.3 percent in the first 26 weeks of fiscal 2017 versus the comparable period last year. Net income for the first 26 weeks of fiscal 2017 was $8.1 million, or 37 cents per diluted share, compared to net income for the first 26 weeks of fiscal 2016 of $1 million, or 5 cents per diluted share, including 4 cents per diluted share of charges for the write-off of deferred tax assets related to share-based compensation.

“After a solid start to the period, sales for our second quarter came in below expectations,” said Steven G. Miller, the company’s chairman, president and chief executive officer. “Same-store sales increased in the low mid-single-digit range for each of our April and May periods, but decreased in the low single-digit range for June as we experienced weakness in certain outdoor product categories related to firearms, camping and water sports, and also began to cycle some of the benefit from the competitor store closures that occurred last year. As a result of the weakness in June, same store sales in our hardgoods category decreased in the low single-digit range for the quarter. Our apparel category continued to perform exceptionally well throughout the quarter, with same store sales increasing in the high single-digit range, and same store sales in our footwear category increased in the low single-digit range for the period.”

He continued: “During the third quarter, we expect sales comparisons to be pressured as we continue to cycle the lift in sales that we experienced last year as a result of the competitor store closures, while also operating in a challenging retail environment. Our efforts are focused on retaining the market share gains that we have produced over the past year, and we believe that our inventories are well positioned for the remainder of the summer and the back to school season.”

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 September 15, 2017 to stockholders of record as of September 1, 2017.

Share Repurchases
During the fiscal 2017 second quarter, pursuant to its share repurchase program, the company repurchased 6,400 shares of its common stock for a total expenditure of $0.1 million. During the fiscal 2017 third quarter through July 31, 2017, the company has repurchased 373,847 shares of its common stock for a total expenditure of $4.3 million. As of July 31, 2017, the company had $19 million available for future repurchases under its $25 million share repurchase program.

Guidance
For the fiscal 2017 third quarter, the company expects same store sales to be in the negative low single-digit range and earnings per diluted share to be in the range of $0.22 to $0.32, compared to a same store sales increase of 6.8 percent and earnings per diluted share of 38 cents, including 3 cents per diluted share for store closing costs, in the third quarter of fiscal 2016. Fiscal 2017 third quarter guidance reflects a small benefit as a result of the calendar shift related to the Fourth of July holiday.

Store Openings
During the second quarter of fiscal 2017, the company opened two stores, ending the quarter with 433 stores in operation. The company anticipates closing one store in the third quarter. For the fiscal 2017 full year, the company currently anticipates opening approximately six new stores and closing approximately three stores.

Photo courtesy Big 5