Big 5’s Q3 Profits Slump 15 Percent

In the quarter ended Oct. 2, sales rose 1.3 percent to $234.7 million, compared to sales of $231.8 million for the third quarter of 2010. Same store sales decreased 0.1 percent for the third quarter of 2011 versus the comparable period last year, when same store sales increased 2.0 percent over the prior year. Sales results reflect continued weakness in the consumer environment, which contributed to a decrease in customer traffic, partially offset by an increase in the average sales ticket.

Gross profit for the fiscal 2011 third quarter was $77.0 million, compared to $77.4 million in the third quarter of the prior year. The company's gross profit margin was 32.8 percent in the fiscal 2011 third quarter versus 33.4 percent in the third quarter of last year. The decrease in gross profit margin primarily resulted from a decline of 40 basis points in merchandise margins, reflecting the impact of promotional activities and product cost inflation.

Selling and administrative expense as a percentage of net sales was 28.8 percent in the fiscal 2011 third quarter versus 28.6 percent in the third quarter of the prior year. Overall selling and administrative expense increased $1.2 million during the quarter from the prior year due primarily to an increase in store-related expenses as a result of new store openings.

Net income for the third quarter of fiscal 2011 was $5.8 million, or 27 cents per diluted share, versus net income of $6.8 million, or 31 cents per diluted share, for the third quarter of fiscal 2010.

For the 39-week period ended October 2, 2011, net sales were $675.4 million compared to net sales of $670.1 million in the 39 weeks ended October 3, 2010. Same store sales decreased 0.9 percent in the first 39 weeks of fiscal 2011 versus the comparable period last year. Net income was $11.7 million, or $0.53 per diluted share, including a $0.02 non-cash impairment charge, for the first 39 weeks of fiscal 2011, compared to net income of $16.6 million, or $0.76 per diluted share, for the first 39 weeks of last year.

“We are pleased to have exceeded our earnings guidance for the third quarter,” said Steven G. Miller, the company's chairman, president and CEO. “The earnings upside was driven by better than expected merchandise margins and favorable operating expenses. After a soft start to the quarter that we believe was largely attributable to unfavorable weather conditions in many of our markets, sales trends improved during August and September and we comped up in the low single-digit range over the back half of the quarter. We produced positive same store sales in both our apparel and footwear categories for the quarter, while our hardgoods category comped slightly down.

“While we are pleased to report that positive sales trends have continued into the fourth quarter, we should note that consumer spending during the upcoming holiday season remains highly unpredictable. We are encouraged by our new merchandise and marketing initiatives and remain focused on identifying opportunities to broaden the reach of both our product and customer base.”

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 December 15, 2011 to stockholders of record as of December 1, 2011.

Guidance

For the fiscal 2011 fourth quarter, the company expects same store sales in the positive low to low-mid single-digit range and earnings per diluted share in the range of $0.12 to $0.24. The company's sales guidance is subject to the impact of consumer demand during the important holiday selling period, for which there is a large degree of uncertainty. A material improvement or decline in the overall consumer environment could materially impact the company's performance relative to this guidance. The company's earnings guidance assumes continued merchandise margin pressure resulting from product cost inflation. For comparative purposes, the company's earnings per diluted share for the fourth quarter of fiscal 2010 were $0.18, including a charge of $0.07 per diluted share related to legal matters.

Store Openings

The company opened three new stores during the third quarter of fiscal 2011, bringing its store count at the end of the quarter to 398 stores. The company has opened two new stores during the fourth quarter to date, and anticipates opening an additional six new stores over the remainder of the fourth quarter. Excluding stores closed as part of relocations that began last year, the company now expects to open 11 net new stores during fiscal 2011.

Amended Credit Facility

On Oct. 31, 2011, the company amended the terms of its existing $140 million revolving credit facility to, among other things, extend the term of the facility to October 2016, reduce the interest rates charged on borrowings, reduce the fee charged for the unused portion of the facility and modify provisions for restricting certain payments and investments. Following the amendment, LIBO rate loans under the credit facility will bear interest based on LIBO rates plus a variable margin rate of 1.50 percent to 2.00 percent based on the remaining availability under the credit line.