By Eric Smith
Poor weather around the country stymied the sales of camping and water sports products at Big 5 Sporting Goods Corp. stores in the back half of the second quarter, driving down income and revenue for the company during the period.
Big 5 reported a net loss for the second quarter of fiscal 2018 of $0.2 million, or (1) cent per share, compared to net income for the second quarter of fiscal 2017 of $2.8 million, or 13 cents per diluted share. Analysts had expected a profit of 11 cents per share.
The company reported sales for the quarter of $240 million, compared to net sales of $243.7 million for the second quarter of fiscal 2017 and missing analysts’ estimates by $7.1 million. Same-store sales decreased 2.1 percent for the second quarter of fiscal 2018 compared to a 0.9 percent increase in same-store sales for the second quarter of fiscal 2017.
“Much of the softness resulted from weak sales of camping and water sports products which were negatively impacted by unfavorable weather conditions in our key markets around the high-volume selling periods with Memorial Day, Father’s Day and the start of summer,” Big 5 President and CEO Steve Miller said on Tuesday afternoon’s conference call with analysts.
“With the return of more normal water levels this year, we believe we were well-positioned to comp positively on our camping and water sports products. Unfortunately, that opportunity was negated by unfavorable weather in our key markets during the peak summer selling periods of the second quarter. Additionally, June sales were negatively impacted by the shift of Fourth of July further into the third quarter this year.”
While sales of hard goods were soft with mid-single-digit declines and footwear sales were down in the low single digits, apparel sales partially offset those two with gains in the low single digits.
But not all was gloomy for Big 5 in the quarter. The period began strong, with April comps up in the low single digits. And Big 5 “delivered improved merchandise margins for the period,” Miller said, with Q2 margins increasing 42 basis points compared to second quarter of fiscal 2017 when merchandise margins jumped by 37 basis points over the prior-year period.
“The increase primarily reflected the sales mix shift towards certain higher margin apparel products and away from low margin products such as firearm, as well as a reduction in our promotional activity due in parts to the timing shift of the July Fourth holiday,” Miller said.
And, the third quarter has gotten off to a strong start, in part because the holiday kicked off the period and better weather should positively impact camping and water sports participation, he added.
“For the third quarter to date, our sales are comping positively in the low-single-digit range as our summer product categories have responded well to improved weather conditions in our markets,” Miller said. “We believe our merchandise assortment is well-positioned for the balance of the summer and the back-to-school and fall sports seasons.”
When asked about the investment Big 5 has made in e-commerce, CFO Barry Emerson said that while brick-and-mortar remains the company’s priority, they are gaining traction online by adding more products and more functionality at the website.
“It’s growing well, but from a relatively small base,” Emerson said. “Our e-commerce business wasn’t material to our overall operating results for 2017, and we don’t see it being material to our results for 2018. We hope that we’ll be able to again just continue to provide a reasonable sales count to our customers.”
For the fiscal 2018 third 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 14 cents to 24 cents, compared to a same-store sales decrease of 2.9 percent and earnings per diluted share of 28 cents in the third quarter of fiscal 2017.
The company opened two stores in California and closed two—one related to a relocation—during the second quarter of fiscal 2018, ending the quarter with 435 stores in operation. During the fiscal third quarter, the company anticipates opening one store, and during the fiscal year, the company anticipates opening five new stores and closing three.
Photo courtesy Big 5 Sporting Goods
[author] [author_image timthumb=’on’]https://s.gravatar.com/avatar/dec6c8d990a5a173d9ae43e334e44145?s=80[/author_image] [author_info]Eric Smith is Senior Business Editor at SGB Media. Reach him at eric@sgbonline.com or 303-578-7008. Follow on Twitter or connect on LinkedIn.[/author_info] [/author]
