With firearms, ammo and winter apparel sales running well below their level of a year ago, Big 5 Sporting Goods Corporation expects same-store sales to decline in the high-single-digits in the current quarter. The retailer said store traffic has been hurt by the extreme drought gripping many of its key markets and plans to carry over much more of its winter apparel to next season than usual and reduce purchasing accordingly.
“Now we have that [firearms and ammo] business – well over 10 percent of our business – running down over 50 percent,” said Big 5 Chairman, President and CEO Steven G. Miller. “The winter business – over 20 percent of our business is running down over 30 percent. So that creates quite a headwind in our business and certainly affects customer traffic levels.”
Robust gun and ammo sales and favorable weather propelled BGFV’s same store sales to grow 10.5 percent in the first quarter of fiscal 2013. BGFV anticipated a steep drop off in firearms sales, but could not foresee how unusually warm weather would lessen demand for apparel in most of BGFV’s key markets.
“We basically missed the opportunity to sell winter product during the key selling periods, the New Years, Martin Luther King holiday, Presidents Day,” said Miller. “Much of our geographies were tremendously lacking in snow.”
For instance, 26 of BGFV’s 429 stores operate within 100 miles of Lake Tahoe, where extreme drought prevented many ski areas form opening until late January this year. In Colorado, where resorts are enjoying normal snowfall, BGFV’s quarter-to-date comp store sales of winter product are up over year ago levels, but not enough to avert a high-single-digit decrease in companywide same-store sales.
“In light of reduced demand for winter products this season, we do anticipate a greater than normal carryover of winter product to next season and plan to structure our purchasing for next season around this carryover,” said the company’s CFO Barry Emerson. BFFV entered wth quarter with 7.4 percent more inventory per store, largely due to slow sales of winter apparel, according to audited financial statements it released last week.
Excluding firearms, ammo and winter products, BGFV sales performed positively for the quarter-to-date and Miller said he expects comp growth to resume after the first quarter. The company expects first quarter earnings per diluted share in the range of 5 cents to 11 cents, compared with 34 cents in 2013.
Miller and Emerson provided the update during an earnings call to discuss the company’s audited financial results for the fiscal fourth quarter and year ended Dec. 29, 2013. The official results matched revenue and earnings guidance the retailer provided in mid-January and provided new details on margins.
Net sales for the quarter increased 1.8 percent to $248.0 million and same-store sales decreased 0.5 percent for the fourth quarter, just as the company’s preliminary estimates said they would. Gross margins crept up 40 basis points (bps) to 32.6 percent, primarily due to a 47 bps improvement in merchandise margins, while SG&A expense climbed 70 (bps) to 28.9 percent. Net income increased 30 percent during the quarter to $5.2 million, or 23 cents per diluted share, or the top end of the company’s mid-January guidance, despite a penny a share in one-time hiring, consulting and other costs related to development of a new e-commerce platform.
While same-store sales of guns and ammo and winter products fell in the quarter, they increased in the low double-digit range in apparel and were slightly positive in footwear, which Miller said validates the retailer’s focus on drawing more affluent customers by stocking more premium apparel brands.
